US midterms could put gold, dollar and Bitcoin on alert: what investors can expect

Next week, financial markets will turn their attention to the US midterms. Although President Donald Trump is not on the ballot himself, the elections will determine who controls Congress over the next two years. The result could have a major impact on taxes, government spending, regulation and, ultimately, major financial assets such as gold, the US dollar and Bitcoin.

Polls currently point to a solid lead for the Democrats in the battle for the House of Representatives. As a result, many investors are anticipating a divided Congress, with Republicans and Democrats keeping each other in check more often. Such political gridlock may sound dull, but it could have major consequences for markets.

Gold benefits

For gold, a divided Congress could prove positive if investors expect less scope for new stimulus measures and higher government spending. A weaker dollar and lower interest rates are traditionally supportive for gold.

Yet a sharp rally is not a given. Persistent inflation and a still hawkish Federal Reserve could keep real interest rates high. That would limit gold’s appeal as a safe haven. A genuine breakout is likely to become convincing only once both the dollar and interest rates fall.

Dollar trapped by political uncertainty

The situation is not black and white for the US dollar either. A divided Congress could temper expectations of additional government debt and fresh economic stimulus. That would weaken the dollar.

At the same time, the greenback remains the world’s leading safe haven in times of uncertainty. If the elections lead to political tensions or market turmoil, the dollar could still benefit from a flight to safety.

Bitcoin waits for liquidity

For Bitcoin, everything hinges on liquidity, rate expectations and risk appetite. Falling bond yields and looser financial conditions are generally positive for cryptocurrencies and tech stocks. A divided Congress could support that scenario.

But if the dollar strengthens and yields remain high, the odds of new record highs fall. That is why crypto investors are watching not only the election result but also the reaction of bond markets, institutional investors and the Nasdaq. The midterms could therefore become an unexpected catalyst for Bitcoin’s next major move.