Gold (XAUUSD) and Silver Analysis: Breakouts Build as Fed Rate Cuts Support Metals

Gold (XAUUSD) continues to rally for a fifth straight session, holding near its fresh record of $3,870 during Asian trading on Wednesday. This surge is driven by weak US jobs data, which reinforced expectations of Federal Reserve rate cuts. These expectations boosted demand for safe havens in both gold and silver (XAG).

The CME FedWatch Tool now signals a 96.7% probability of a Fed rate cut in October, as shown in the chart below. This outlook dragged the US Dollar lower, making gold more attractive for overseas buyers. As demand strengthened, bullion prices quickly recovered from intraday dips, reflecting strong resilience.

Moreover, the uncertainty over a potential US government shutdown added another layer of support. The political gridlock raised the risk of suspended economic data releases, including Friday’s jobs report, which in turn amplified safe-haven demand. With both monetary easing expectations and fiscal risks in play, gold remains well-positioned to hold elevated levels.

Gold Technical Analysis

XAUUSD Daily Chart – Strong Bullish Momentum

The daily chart for spot gold indicates that the price is continuing to move toward the $4,000 area. This target is based on the breakout from the ascending triangle pattern near the $3,500 region. The 50-day SMA remains above the 200-day SMA, and the 200-day SMA continues to rise, indicating a strong bullish trend. However, the RSI has reached extreme overbought conditions, which call for a possible correction. Despite this, the bullish momentum remains strong.

XAUUSD 4-Hour Chart – Positive Price Development

The 4-hour chart for spot gold shows that the price continues to move higher after breaking out of the ascending channel pattern. The consolidation within the channel indicates bullish accumulation, and the formation of a rounding cup above it confirms a strong bullish trend. Any correction will likely be viewed as a buying opportunity, with a target in the vicinity of the $4,000 level.

Silver Technical Analysis

XAGUSD Daily Chart – Strong Bullish Momentum

The daily chart for spot silver shows the formation of an inverted head-and-shoulders pattern, signalling intense positive price action. In addition, the development of an Adam and Eve pattern above the breakout line and the surge above the $35 area indicate that silver is likely to move toward the record level of $50.

A break above $50 would initiate another substantial rally in silver prices. However, the RSI has reached extreme overbought territory, indicating a potential risk of a sharp correction.

XAGUSD 4-Hour Chart – Positive Price Development

Strong bullish momentum is also visible on the 4-hour chart, which shows that prices have broken out of the ascending broadening wedge pattern and continue to move higher. The correction in spot silver retested the red dotted trendline at $45.80, after which prices resumed their upward move. This suggests that silver has entered a new bullish phase.

US Dollar Index Technical Analysis

US Dollar Daily – Rebounds from Long-Term Support

The daily chart for the USD Index indicates that the index has broken down from the bear flag pattern and is moving toward the 96.50 level. A strong rebound from this long-term support has reached the resistance of the bear flag pattern, but continues to consolidate below the 50-day SMA. This indicates that the index remains in consolidation within a bearish trend, and a drop below 96.50 would signal further downside in the US Dollar Index.

US Dollar 4-Hour Chart – Negative Price Action

The 4-hour chart for the US Dollar Index shows that the index is consolidating between the 96.50 and 100.50 levels. A break above 100.50 is required to push the index higher, while a break below 96.50 would extend the negative trend in the US Dollar Index.