Gold (XAUUSD) and Silver Set to Surge as US Dollar Weakens Amid Recession Fears

President Trump’s unprecedented move to fire Federal Reserve Governor Lisa Cook injected fresh political risk into financial markets. In response, gold (XAUUSD) reacted strongly, rallying on the news as investors sought a hedge against uncertainty.

Additionally, the challenge to the Fed’s independence raised fears of deeper political influence over monetary policy. These risks tend to weaken confidence in the dollar and support safe-haven assets. Furthermore, the lawsuit filed by Cook only deepened the sense of instability.

The move to remove Governor Cook sparked speculation that Trump could soon secure a majority on the Federal Reserve Board. His appointees, such as Waller and Bowman, already favour lower interest rates. If Trump gains more influence, markets anticipate faster policy easing. This outlook has bolstered bullish momentum for gold and silver (XAGUSD).

Moreover, the gold prices are gaining strength as recession fears return. The chart below shows that the steep drop in the Conference Board’s Leading Economic Index signals broad economic weakness.

A decline of more than 4.1% over six months confirms a clear warning of a recession. All ten components of the LEI indicate strain, reflecting the deepening of cracks in the economy. This fuels demand for gold.

Moreover, consumer confidence remains low, mirroring the levels seen during the 2020 pandemic. In August, 71% of respondents said a US recession is likely within a year. This sharp jump adds pressure on the Fed to ease policy. As fear spreads, investors are shifting toward gold to preserve value in uncertain times.

Gold Technical Analysis

XAUUSD Daily Chart – Preparation for Next Surge

The daily chart for spot gold shows that the price pushed above the $3,400 area on Thursday. Now, it is entering the red zone between the $3,450 and $3,500 region. A break above $3,500 will likely trigger a strong surge in gold prices. Consequently, this breakout could initiate a move toward the $4,000 area.

XAUUSD 4-Hour Chart – Positive Price Development

Currently, spot gold prices are consolidating within a strong sideways range between the $3,250 and $3,450 region. This consolidation increases the likelihood of an upside breakout. If confirmed, a break above $3,500 could trigger a gradual surge in gold prices. Moreover, as the seasonal correction period nears its end, an upward breakout appears increasingly likely.

Silver Technical Analysis

XAGUSD Daily Chart – Positive Price Development

The daily chart for spot silver shows that prices are consolidating around the $39 region within a strong bullish trend. The formation of a bullish hammer on the 50-day SMA above the $36 level suggests that silver is likely to break higher.

Additionally, the RSI is holding above the mid-level, indicating continued upside momentum. A break above the $40 region would likely trigger a move toward the $42 level in spot silver.

XAGUSD 4-Hour Chart – Positive Price Development

The 4-hour chart for spot silver also shows the formation of a bullish price structure above the $34.50 support region. Prices are building a strong bullish setup, suggesting a potential breakout. A move above $40 would likely trigger a rally toward the $42 region.

US Dollar Index Technical Analysis

US Dollar Daily – Bear Flag

The daily chart for the US Dollar Index indicates that prices are consolidating within a bearish flag and appear poised for a potential breakdown. Meanwhile, strong resistance remains at the 100.50 level, where a bearish hammer has formed. Moreover, the ongoing consolidation near the lower boundary of the bear flag suggests that the next move is likely to the downside.

A break below the 97 level would initiate a move toward 96, while a further drop below 96 could target the 90 level. A breakdown in the US Dollar Index would likely strengthen the gold and silver prices.

US Dollar 4-Hour Chart – Ascending Broadening Wedge

The 4-hour chart for the US Dollar Index shows that prices are consolidating within the support zone and appear to be leaning toward a downward move. This consolidation signals sustained bearish pressure. Therefore, it suggests that the next breakout is likely to occur to the downside.