Gold and Silver Technical Analysis: Oil Shock Keeps Metals Under Pressure

Gold (XAU) prices remain weak on Friday and consolidate in a tight range. The lack of liquidity in Asia kept moves contained as China and India were on holiday. The spot gold trades at $4,615 and consolidates between $4,500 and $5,000. However, gold was still poised for a weekly decline after dropping to one-month low this week.

The key factor weighing on gold is rising oil prices. Brent crude oil has remained above $115 with the Iran war unresolved and a continued threat to the Strait of Hormuz. And Iran threatened to retaliate with “long and painful strikes” in the event of a U.S. attack. This uncertainty drove up oil and inflation concerns. When gas prices increase, this means inflation is likely to be more persistent.

This is bad news for gold. Investor concerns about inflation and geopolitical risk tend to be positive for gold. But higher inflation makes it less likely that interest rates will be cut early. The US Federal Reserve, ECB, Bank of England and Bank of Japan all held steady as central bankers were worried about inflation. Higher-for-longer rates can be a drag on gold as it does not offer an income. So gold may continue to face pressure in the short term unless geopolitical risk wins over rate risk.

Gold Technical Analysis: Rebound Fades as Short-Term Pressure Builds

The daily chart for spot gold shows a strong rebound from the long-term support of the $4,400 to $4,500 region. The price hit the upper band of the support at $4,500 and initiated a rebound. However, the price structure remains weak in the short term, and the correction may develop further within the $4,400 to $4,500 area.

A break below $4,400 will push the price toward the $4,275 at the 200-day SMA. Moreover, a break below $4,275 will indicate further downside toward the $4,000 region.

The 4-hour chart for spot gold also shows a negative price section in the short term. The RSI has hit the midline on the 4-hour chart after the rebound on Thursday, which suggests that the price may consolidate below $4,650 on Friday.

Silver Technical Analysis: Broad Consolidation Keeps Direction Unclear

The daily chart for spot silver (XAG) shows that the price hit $72 on Wednesday but initiated a rebound from this support zone on Thursday. However, the silver price also remains in a consolidation zone and has no clear direction.

The price may further correct lower below the $72 area to target the $50 to $60 region. The zone of $50 to $60 remains the key zone. Any recovery from this zone will indicate a strong rally for the next few weeks.

The consolidation in silver is also evident in the ascending broadening wedge pattern. The price has been moving in this zone in April due to the US-Iran crisis. If the crisis persists, the silver price will likely move toward the $50 to $60 area, where it will attract attention to move further higher.

The chart shows that silver requires a break above $90 to trigger a strong move.

Bottom Line

The short-term outlook for gold and silver is still negative as rising oil prices continue to put pressure on inflation and delay interest rate cuts. Gold is attempting to rebound from the $4,400 to $4,500 support zone but the trend is still bearish below $4,650. If it breaks below $4,400, then $4,000 might be the next target. Silver is also in correction, with $72 as the first support and $50 to $60 as the major support zone. But geopolitical tensions still back both metals prices in the long run. If oil prices remain high and the risk in Iran remains elevated, gold and silver could be considered as safe-haven assets, once this correction is over.

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