Gold and silver prices in India surged on Wednesday following the Democrats' victory in the US midterm elections. MCX Gold Futures (December expiry) climbed 2.35%, while MCX Silver Futures (December expiry) rose 3.85%. The rally was driven by a weaker US dollar, as Democrats gained control of both the Senate and House of Representatives, flipping several Republican strongholds.
The weaker dollar made dollar-denominated assets like gold and silver more affordable for international buyers. Gaurav Garg, Head Research at Lemonn, noted that international spot gold advanced above $4,040 per ounce, while silver neared $52 per ounce. However, he cautioned that the election outcome should be seen as a short-term catalyst rather than the start of a sustained rally.
For Indian investors, the impact was amplified by rupee movements. A weaker rupee could further boost imported bullion prices, while a stronger rupee might offset some gains. Meanwhile, analysts warned that the US Federal Reserve's hawkish stance on inflation could limit further upside for gold and silver.
Hamad Hussain, senior climate and commodities economist at Capital Economics, told Reuters that the Fed's focus on inflation means gold's gains may be capped. Additionally, gold's positive correlation with equities could weigh on prices if tech stocks continue to decline.