Gold hits 2-week high as dollar, yields, oil fall after US midterms

By Sherin Sans

Nov 5 (Reuters) - Gold prices extended their post-US midterm election rally to a more than two-week high on Thursday, as the US dollar and Treasury yields weakened, while a sharp drop in oil prices in the previous session eased inflation concerns.

Spot gold gained 1.9% to $4,134.82 per ounce by 1117 GMT after hitting a session high of $4,146.63 per ounce, a level last seen on October 20.

Gold jumped nearly 3.4% on Wednesday, its sharpest daily rise since August 19, with prices up over $250 this week from a one-year low of $3,869.85 hit on Friday.

US gold futures for December delivery rose 1.8% to $4,145.10 per ounce.

"Precious metals have emerged as major winners following the US elections," said Ole Hansen, head of commodity strategy at Saxo Bank.

"The powerful combination of falling energy prices, easing inflation and interest rate concerns, and declining Treasury yields and the dollar has forced recently established speculative shorts to cover," Hansen added.

Brent crude edged up on Thursday but was below $100 a barrel after diving nearly 9% on Wednesday on hopes that major Democratic gains in the elections could reduce the risk of further escalation in the Iran war. The US dollar and Treasury yields were at multi-week lows. USD/ US/ [O/R]

Lower energy prices help ease inflation concerns and reduce expectations of higher-for-longer interest rates, while a weaker dollar makes dollar-denominated gold less expensive for buyers holding other currencies, supporting demand for the precious metal.

Traders currently see a 79% chance that the Federal Reserve will raise rates in December, according to CME's FedWatch tool.

Investors are also awaiting US non-farm payrolls report due on Friday for further cues on the central bank's trajectory.

Meanwhile, the Bank of England is widely expected to raise interest rates for the first time in three years on Thursday, taking a path already embarked on by all its main peers.

Among other metals, spot silver rose 1.3% to $52.88 per ounce, platinum gained 1.8% to $1,523.51 and palladium climbed 2.8% to $1,033.25.