Gold (XAUUSD) and Silver Technical Analysis Amid Post-Shutdown Volatility and Fed Caution

Gold (XAUUSD) prices dropped sharply on Thursday as markets reacted to the end of the U.S. government shutdown. The reopening removed a key uncertainty, prompting investors to unwind safe-haven positions in gold, silver, and other defensive assets.

The initial rally was driven by hopes that weak post-shutdown economic data might prompt the Federal Reserve to consider another rate cut in December. Gold surged to its highest level since late October, but sentiment quickly shifted.

According to the FedWatch tool, the probability of a 25-basis point cut has dropped to 50.7%. However, statements from Fed officials signaled caution. With lingering concerns about inflation and no clear evidence of a weakening labor market, the Fed hinted at a potential pause in further easing. This shift in tone undercut gold’s bullish momentum.

Moreover, tight liquidity also weighed on sentiment. The Secured Overnight Financing Rate (SOFR) remains elevated above the Interest on Reserve Balances (IORB), indicating continued stress in financial markets.

Gold benefits from lower interest rates and heightened uncertainty. However, the sudden return of risk appetite and the Fed’s reluctance to cut further prompted investors to rotate out. Moreover, the sharp pullback in silver highlighted growing risk aversion in the market. On the other hand, Bitcoin’s weakness near key support levels of $100,000 reinforced the view that liquidity conditions remain fragile despite the resolution in Washington.

Gold Technical Analysis

XAUUSD Daily Chart – Ascending Broadening Wedge

The daily chart for spot gold shows that the price has rebounded after forming a rounding bottom above the 50-day SMA, reaching strong resistance in the $4,150 to $4,200 region. A break above $4,250 would likely increase the probability of a breakout to new all-time highs.

The price is currently forming another ascending broadening wedge at the edge of the previous one. This pattern signals increased volatility and the potential for sustained momentum. Additionally, the rebound from the mid-level of the previous wedge suggests underlying strength in the trend. This indicates that gold prices are likely to remain elevated in the near term.

XAUUSD 4-Hour Chart – Bullish Price Action

The 4-hour chart for spot gold shows a strongly bullish price structure, with a rebound from the black dotted trend line near the $3,900 region. This rebound followed the formation of a triple bottom pattern around $3,900 and a breakout above the $4,150 level.

The breakout signals the potential for sustained upward momentum as long as the price holds above the $4,030 support. A decisive break above the $4,400 region would likely pave the way for a strong move toward the $5,000 level.

Silver Technical Analysis

XAGUSD Daily Chart – Super Bullish Momentum

The daily chart for spot silver (XAG) shows that the price formed a bottom at the $45 support, aligned with the 50-day SMA, and then broke above the $49.30 level. After this breakout, the price reached its all-time high near $54.40 and is now consolidating while searching for direction.

A break above $54.40 would likely trigger the next wave of upside momentum in the silver market.

XAGUSD 4-Hour Chart – Key Resistance

The 4-hour chart for spot silver shows that the price has formed an inverted head-and-shoulders pattern above the $45.80 level and broke the neckline at $49.30.

Following this breakout, the price reached an all-time high at $54.40 and is now consolidating. A break above $54.40 would confirm a strong bullish structure and could trigger a move toward the $60 level.

US Dollar Index Technical Analysis

US Dollar Daily – Negative Price Action

The daily chart for the US dollar index shows that the index has formed strong resistance at the 200-day SMA at 100.50 and continues to move lower.

A break below the black trend line signals strong bearish momentum and suggests further downside in the coming days. A drop below the 98 level would open the path toward 96.50, and a confirmed break below 96.50 could trigger a sharper decline toward the 90 level.

US Dollar 4-Hour Chart – Consolidation

The 4-hour chart for the US dollar index shows strong consolidation between 96.50 and 100.50. After reaching the upper boundary at 100.50, the index is now attempting to move lower toward 98.60. A break below 98.60 would signal bearish price action and could lead to a further decline toward the 96.50 level.