Gold Tops $4,000 Again as the Dollar Slips. Why It's Still Down This Year

Gold rose almost 3% on Wednesday morning, back above $4,000 an ounce and to its highest level since October 29. Silver gained more than 4% to about $52, platinum more than 3%, and palladium about 6%. The US dollar index fell about 0.3%.

The trigger was the midterm elections, in which Democrats won both houses of Congress. That might seem an odd reason for gold to rise, since gold has no political party. The connection runs through the dollar and interest rates.

Why the election moved gold

Gold is priced in US dollars and pays no interest. That makes two things especially important for its price:

1. The dollar. When the dollar weakens, gold becomes cheaper for buyers using other currencies, which tends to lift demand and the dollar price.
2. Real interest rates. Because gold pays nothing, holding it means giving up the interest you could earn on bonds. When yields rise, that cost rises, and gold usually suffers. When yields fall, gold becomes more attractive.

On Wednesday, both moved in gold’s favour. Investors expect a divided Washington to pass fewer large tax cuts or spending programs, so the government will need to borrow less. That pulled Treasury yields down slightly and weighed on the dollar. Rhona O’Connell of StoneX also pointed to “fiscal brinkmanship” and “institutional friction” between the White House and Congress, both of which add uncertainty, and gold tends to benefit from uncertainty.

Why gold is still down this year

The bigger story is how gold has behaved in 2026. After rising 66% in 2025, it is down more than 7% this year, and silver has fallen almost 28%. That’s notable in a year that included a war in the Middle East and an oil shock, the kind of events gold is supposed to protect against.

The explanation is the second factor above. This year has brought rising inflation, sharply higher bond yields and central banks that are raising rates rather than cutting them. The 10-year Treasury yield is near 4.9%. When safe bonds pay that much, the cost of holding a metal that pays nothing is high, and that has outweighed gold’s appeal as a haven.

Daniela Hathorn of Capital.com made a related point: geopolitical risk isn’t reliably driving demand for gold this year because tight monetary policy worries investors more. She also warned that precious metals “face the risk of liquidation during sharp equity selloffs,” when investors sell whatever they can to raise cash.

What could happen next

The Federal Reserve is the main variable. Markets see a high probability of another rate increase in December, and Friday’s jobs report will shape that. A strong report would make a hike more likely, which would usually be bad for gold. A weak one could do the opposite.

Gold in a portfolio

For long-term investors, 2026 is a useful reminder about what gold does and doesn’t do:

• It doesn’t reliably rise when there’s bad news. It rises when real interest rates fall or the dollar weakens, which often happens during crises, but not always.
• It can diversify a portfolio, because it often moves differently from stocks and bonds. But it can also have long, painful stretches of losses, and it pays no income while you wait.

Those who hold gold usually do so as a small part of a portfolio, as insurance rather than a source of returns. This year has shown that even insurance can lose value for a while.