Gold (XAUUSD) and Silver Technical Analysis: Metals Under Pressure Near Key Support

Gold (XAU) prices fell on Thursday as rising US Treasury yields pressured the market. Gold dropped over 4% on investors’ reaction to higher energy prices and inflation fears. On the other hand, the silver (XAG) price was also under pressure as it tends to follow gold during broad market moves.

The Federal Reserve, ECB, BoE and BoJ all left rates unchanged but signalled a slightly hawkish stance. Policymakers are concerned about inflation after the energy crisis that began during US-Iran War. The Fed signaled that rate cuts will be limited, which offers higher yields for longer. This is not a favorable environment for gold and silver in the short term because tighter financial conditions reduce demand for safe haven assets.

At the same time, the US dollar dropped lower from the strong resistance of 100.50 which helped limit deeper losses in gold and silver. The chart below shows that the US dollar index is trading between 100.50 and 96.50. A break of this range is required to lift the US dollar.

Gold Technical Analysis: Correction Reaches Critical Support Area

The daily chart for spot gold shows that the price has dropped towards the strong support zone of $4,400 to $4,500. This support zone is an important area for the gold market to decide the next move. A break below $4,400 will indicate further downside towards $4,000. However, a strong recovery above $5,000 is required to initiate another rally to record highs. The support area is also highlighted by the 100-day SMA.

The 4-hour chart for spot gold shows that the correction in the gold market has taken the price towards $4,500. This support holds above the red highlighted in the chart below. As long as the red-highlighted support region holds, the gold market may consolidate around this level to form another bottom and rally higher.

Silver Technical Analysis: Correction Tests Support within Bullish Structure

The daily chart for spot silver shows a strong correction again towards $72. However, a strong drop towards the $65 support area has produced a shadow on the daily candle which indicates buying interest in the silver market around these levels.

As long as the silver market remains above $50, the next move in silver will likely be higher towards the $120 area. However, the price may consolidate around these levels to form patterns that can initiate a bullish rally.

The 4-hour chart for spot silver shows strong bullish construction within the ascending broadening wedge pattern. The support of $72 is defined by the ascending broadening wedge support, which was hit on Thursday. The price is consolidating around this support on Friday.

A break below the $64 area will indicate further downside towards $50. However, a break below $50 is unlikely and would invalidate bullish outlook and open the door for further downside over the next few weeks.

Bottom Line

Gold and silver remain under pressure with rising yields and inflation concerns. The short term trend points to correction in precious metals while gold and silver are testing key support levels. Spot gold needs to hold $4,400 to $4,500 to prevent further decline.

On the other hand, spot silver needs to hold $50 to preserve its bullish structure. The price could consolidate in near term as markets adjust to higher yields and policy signals. However, if support levels are respected, both metals have potential to recover and move higher in the longer term.

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