Gold and Silver Slide Sharply as Markets Brace for Trump’s Fed Pick and PPI Data

Gold (XAUUSD) is experiencing pressure after hitting the resistance of $5,600. The price dropped to $5,100 after a wild swing on Thursday. The massive drop of $500 in just minutes indicates sharp volatility and possible change in sentiment. Traders are now bracing for more downside ahead of Trump’s announcement on the next Fed Chair. The uncertainty remains high and markets are responding before the news.

On the other hand, the U.S. Dollar is rebounding from the long term support of 96. A deal to avoid a government shutdown and profit-taking in the currency market has resulted in rebound in USD. Despite the drop in gold yesterday, the metal is expected to produce strong gain for the month.

Silver price also followed the gold’s sharp drop from overextended levels. Both metals appear weak in the short-term but long-term fundamentals are healthy. Geopolitical tensions with Iran, Cuba and Canada are emerging in the background. These tensions leave the door open for renewed demand when this correction ends. The market is now looking for close attention to the PPI data on Friday and Trump’s decision on the Fed. These events may determine the next move in both metals.

Gold Technical Analysis

The daily chart for spot gold shows that the price surged to $5,600 and then corrected lower with $500 drop in just a few minutes. This strong volatility in gold market indicates that something big is developing, as gold has hit the strong long-term resistance of $5,500.

The volatility bar on Thursday indicates that the gold market may introduce a correction before the next move higher. The major support zones for gold are $5,000 and $4,500.

The $500 drop in a few minutes can also be observed on 4-hour chart. It is observed that this drop does not change the long-term bullish outlook, as the price has formed base patterns around $4,000. As long as the gold price remains above $4,000, the long-term and medium-term trend remains higher.

The strong correction in gold market was due to extremely overbought conditions seen by the RSI on the 4-hour chart. This correction was required to keep the market healthy.

Silver Technical Analysis

The daily chart for spot silver (XAG) also shows a strong drop of around $10 after marking a high at the $120 level. The chart shows that the silver market is also overextended above the $100 region, which indicates that a correction may develop.

However, the formation of the ascending broadening wedge and cup and handle patterns above rising support trend line indicates that the overall picture remains bullish. The silver correction should find strong support around $60–$70, whereby next move higher may even be stronger.

The 4-hour chart for silver shows the extended rally above ascending broadening wedge pattern above $100. This overextension in silver market may introduce a correction towards $100 level in the short term. A break below $100 may introduce further downside to $70 to $60. However, this correction will be considered as a strong buying opportunity for the next move higher.

US Dollar Index Technical Analysis

The earlier rally in gold and silver has been driven by strong bearish pressure in the US Dollar Index. The US Dollar Index broke 96 this week. However, the index is now rebounding from oversold levels to find the next resistance.

This rebound in the US Dollar Index may introduce a correction in the gold and silver prices, which will serve as buying opportunity for metals. However, the rebound in the US Dollar Index will likely be limited and will likely introduce another drop in index towards 90.

The 4-hour chart for the US Dollar Index shows strong consolidation between the 96 and 100 levels. The index is attempting to confirm a breakdown below 96. A rebound in US dollar might be limited and introduce another selling pressure.