Gold (XAUUSD) and Silver Technical Analysis: Fed Easing and Geopolitics Fuel Demand

Gold (XAUUSD) prices dropped below $4,350 during early Asian trading on Friday, driven by profit-taking and weak long liquidation from short-term futures traders. The decline follows a strong rally earlier in the week, prompting traders to lock in their gains. However, the retreat appears shallow so far, suggesting that selling pressure remains limited and controlled.

Despite the pullback, gold’s downside may be capped by growing expectations of additional rate cuts from the U.S. Federal Reserve. The November CPI came in at 2.7%, well below the forecast of 3.1%. On the other hand, core CPI also missed estimates. These inflation readings strengthen the case for further easing in 2026.

On the other hand, the geopolitical risks further support gold’s long-term bullish outlook. The increase in tensions between the U.S. and Venezuela, including naval escorts and threats of a blockade, raises fears of broader regional instability. Additionally, strong demand for gold from industrial and investment sectors continues to support the market. Traders will also watch the University of Michigan Consumer Sentiment Index for fresh clues on economic conditions that could influence Fed policy and gold prices.

Gold Technical Analysis

The daily chart for spot gold shows that the price is forming an ascending triangle pattern within a broader ascending wedge. This combination is strongly bullish, suggesting that a break above $4,380 could trigger a significant upward move.

Gold has been consolidating below the $4,350 level for the past five days, indicating price compression and increasing the likelihood of an upside breakout. Additionally, the RSI has reached the 70 level, signaling strong momentum and potentially continuing to rise.

The 4-hour chart for spot gold also shows strong consolidation above the $4,260 support level, which formed after the breakout from a topping pattern. This consolidation reflects bullish price action, increasing the probability of an upside breakout. The market may continue to consolidate before the next move, but the current structure indicates a healthy bullish setup.

Silver Technical Analysis

Despite the strong consolidation in the spot gold market, silver (XAG) is taking the lead. Silver is driving the precious metals rally and recently surged to a high above $66.

The formation of an Adam and Eve pattern, followed by a cup-and-handle pattern, signals strong bullish momentum in silver. Moreover, silver shows strong potential to move much higher after breaking out above the $50 level.

Any correction in the silver market should be seen as a strong buying opportunity. Furthermore, this correction could set the stage for the next potential surge toward the $75 level.

The 4-hour chart for spot silver also shows that the price remains unstoppable after forming strong bullish price action. The emergence of an inverted head and shoulders pattern in November signaled the beginning of a bullish setup. Subsequently, the breakout from a wedge pattern in December confirms sustained upward momentum in the silver market.

US Dollar Index Technical Analysis

The daily chart for the U.S. Dollar Index shows bearish pressure below the 200-day SMA after failing to break above the 100.50 level. This weakness suggests that the index has the potential to move lower.

A break below the 98.00 level would increase the likelihood of a downside trend toward 96.50. However, a decisive move above 100.50 is needed to negate the current bearish price action.

The 4-hour chart for the U.S. Dollar Index shows strong consolidation after a breakout from the neckline at the 99.00 level, followed by the formation of a double top near 100.50. The overall outlook remains bearish, and a break below 98.00 could trigger the next downside move. However, a breakout above 100.50 would increase the likelihood of upward momentum toward the 102.00 level.

Bottom Line

Gold remains supported by a combination of bullish technical patterns, subdued inflation data, and escalating geopolitical risks. While short-term selling has pushed prices below $4,350, the overall structure favors another breakout higher. Silver’s leadership and the weakening U.S. Dollar Index add further strength to the precious metals outlook. As the Fed leans dovish and global tensions rise, both gold and silver are likely to resume their upward momentum in the days ahead.