Gold (XAUUSD) and Silver Analysis: How Fed Liquidity Stress Could Trigger a Pullback

Liquidity Stress and Its Short-Term Impact on Precious Metals

The chart below shows that the secured overnight financing rate (SOFR) spiked above the Fed’s Interest on Reserve Balances (IORB). This indicates acute stress in short-term funding markets. SOFR trades below IORB because loans backed by U.S. Treasuries are seen as ultra-safe. When SOFR rises above IORB, it means even large institutions are hesitant to lend, despite high-quality collateral.

This reflects a serious liquidity crunch. As trust breaks down in overnight lending, financial institutions hoard cash, amplifying systemic risks. These dislocations precede broader market volatility in equity and credit markets.

This tightening of liquidity can trigger a risk-off move across asset classes. In the short term, it may spark a selloff in gold (XAUUSD) and silver (XAGUSD) as institutions rush to cover margins or raise cash, leading to temporary weakness in precious metals.

Additionally, after a record-breaking rally, gold is due for a consolidation phase, as physical demand recedes after the festive season. With gold priced near all-time highs, even a minor financial shock can induce a healthy pullback as investors rebalance portfolios.

Silver may also correct sharply due to its industrial exposure and lower liquidity. However, if the Federal Reserve steps in to inject liquidity or signals an imminent rate cut at the October 28–29 FOMC meeting, this could reignite bullish momentum in gold and silver.

Central bank intervention debases fiat and stokes inflation fears, which favor precious metals. Moreover, investors will likely interpret any Fed liquidity injection as a dovish pivot, which strengthens the long-term bull case for gold.

Overall, while short-term pressure from liquidity stress may cause a pullback, the broader environment of monetary easing and financial instability continues to support gold and silver as safe-haven assets.

Gold (XAUUSD) Technical Analysis

The daily chart for spot gold shows that the price has completed a $900 measured move from the August 2025 lows to the October 2025 highs. This measured move was derived from the rally between the December 2024 lows and the April 2025 highs. Following the breakout from the symmetrical triangle, this level represented the projected target for gold.

However, the rally from the August 2025 lows has been exceptionally strong, with price action marked by sharp volatility. If gold continues to trade above the $4,380 level, it may continue to push higher in the coming weeks. However, the RSI indicator shows that the price is extremely overbought in the short term. This condition suggests that a correction or consolidation may occur before the next move higher.

Silver (XAGUSD) Technical Analysis

The weekly chart for spot silver shows that the price has formed a long upper shadow on the weekly candle near the resistance marked by the red trendline. This indicates hesitation to break higher and suggests a potential consolidation around this level. However, spot silver has already broken above the long-term resistance at $50, meaning any correction back toward this zone could attract renewed buying interest.

A decisive break above the $55 area would likely propel prices toward the next key resistance near $60. Overall, investors are likely to view any short-term pullback in silver as a buying opportunity within the broader bullish trend.

The daily chart for spot silver shows that the breakout above the $50 resistance has now turned this level into a key support zone. The price may consolidate around this area before establishing the next base for a potential move higher. The RSI indicator shows that silver is extremely overbought in the short term. This condition signals a possible temporary correction or sideways movement before the next upward move.