Gold and Silver Analysis: Fed Policy Shift and Silver Strength Drive Bullish Outlook

Gold (XAU) prices extended gains above $4,300 during Asian trading hours. Slowing momentum in the US labor market supported the rally. Although nonfarm payrolls came in strong, rising unemployment and soft wage growth pointed to a cooling economy. This mixed data increased expectations for more rate cuts in 2026. As a result, the US Dollar weakened, making gold more attractive.

The Fed cut rates again in December, but officials remain divided on the path for 2026. The markets expect at least two cuts next year, but some policymakers remain cautious. Any hawkish comments from upcoming Fed speakers could cause a short-term rebound in the US Dollar.

However, with inflation cooling and growth moderating, the broader trend supports a bullish bias in both gold and silver. Traders are watching the CPI and PCE data for further confirmation.

Moreover, silver is leading gold and has broken above the $64.50 level. The breakdown in the gold-to-silver ratio confirms silver’s leadership within the precious metals space. Economic softness, particularly in retail sales and employment, enhances silver’s appeal as a hedge against financial uncertainty.

The widening divergence between the strength of hard assets and a weakening US dollar continues to support both metals. If upcoming inflation data confirms a disinflationary trend, silver may extend its gains with gold in the coming sessions.

Gold Technical Analysis

The daily chart for spot gold indicates that the price is consolidating above the $4,200 level, maintaining a bullish structure. A breakout above the $4,380 resistance will likely trigger a strong surge in gold prices.

The tight consolidation over the past few days increases the probability of an upside breakout in the gold market. Price action remains within an ascending broadening wedge pattern, which signals rising volatility and a potential acceleration in momentum.

The 4-hour chart for spot gold also shows a bullish continuation above the $4,260 level, following the formation of a rounding bottom pattern. A breakout above $4,350 would signal further upside potential.

However, a drop below the $4,260 level could indicate downside risk toward the $4,150 support area. Overall, the price structure remains bullish as long as gold trades above the black dotted trendline.

Silver Technical Analysis

Silver has marked a new high above the $64.50 level and continues to surge, leading the precious metals market. The significant breakdown in the gold-to-silver ratio confirms silver’s leadership, suggesting that silver will likely extend its rally over the coming weeks.

The 4-hour chart for spot silver also shows a bullish continuation above the $60 area, indicating strong upward momentum in the silver market. As long as the price holds above the $55 support level, silver is likely to trend higher in the coming days.

US Dollar Index Technical Analysis

The daily chart for the US Dollar Index shows strong negative price action below the 99 level. The index recently touched the 98 level and is attempting a rebound. However, a break below 98 would trigger further downside toward the 96.5 support.

Overall, the index has failed to break above the 100.50 resistance, reinforcing the bearish outlook. A decisive break below 96.5 would confirm a deeper drop toward the 90 level.

The 4-hour chart for the US Dollar Index shows a double top formation and a continuation of the downtrend after breaking below the 99 level. The failure to break above 100.50, combined with the double top pattern, indicates sustained bearish pressure in the USD Index.

Bottom Line

Gold and silver remain well-supported, as macroeconomic data indicate cooling growth. The Fed’s rate cuts and a weakening US Dollar have reinforced bullish momentum across both metals. Silver’s breakout above $64.50 and leadership over gold signal renewed investor interest.

Meanwhile, technical patterns in both gold and silver suggest further upside is likely. Moreover, the bearish structure in the US Dollar Index adds fuel to the rally. As traders await key inflation data, the path of least resistance for precious metals appears tilted to the upside.