Gold (XAUUSD) and Silver (XAGUSD) Set to Breakout Amid US Dollar Weakness

Gold (XAU/USD) and Silver (XAG/USD) prices continue the upward trend as market risk appetite declined sharply following President Trump’s threat to impose 50% tariffs on EU imports starting June 1. This escalation in the trade war triggered renewed demand for safe-haven assets. Gold is trading around $3,340 after rebounding from $3,280. Silver also gained bullish momentum, supported by industrial and safe-haven demand. The aggressive tariff warning and stalled EU-US trade talks have heightened fears of further global economic strain.

The passage of a $4 trillion debt-heavy budget by the US House added to market uncertainty. Investors responded negatively to the looming fiscal burden, especially as the bill now heads to the Senate. This development weakened the US Dollar Index, which dropped below 99, providing a significant tailwind for dollar-denominated assets. Meanwhile, 10-year Treasury yields fell almost three basis points to 4.505%, reinforcing the bullish outlook for precious metals.

On the other hand, US Building Permits dropped from 1.481 million to 1.422 million, reflecting weakness in future construction. Meanwhile, New Home Sales rose to 0.743 million, signalling mixed momentum in the housing sector.

St. Louis Fed’s Musalem and Chicago Fed’s Goolsbee expressed caution and called for patience regarding further rate moves. With money markets now pricing 49.5 basis points of rate cuts by year-end, gold and silver will likely benefit from a weakening dollar in the coming months.

Gold (XAUUSD) Technical Analysis

Gold Daily Chart – Descending Channel

The daily chart for gold shows that the price is approaching the edge of a breakout from the descending channel. A daily close above $3,370 will signal a potential breakout, and prices will likely continue higher toward the $3,500 region.

The emergence of a bullish hammer at the 50-day SMA, followed by strong follow-through toward the descending channel’s resistance, indicates bullish momentum. Moreover, the RSI is rebounding from the mid-level, further supporting the case for continued upward movement.

Gold 4-Hour Chart – Descending Channel

The 4-hour chart shows that the price is approaching the edge of the descending channel. The bottom of the support of this wedge was formed by an inverted pattern of head and shoulders. A breakout from this descending channel would signal a move toward the $3,500 region.

The price structure reflects bullish momentum. The RSI suggests that the recent correction from the $3,500 level was due to extremely overbought conditions. The price will likely continue to rise after the inverted head and shoulders pattern is formed. However, the support of $3,245 must hold.

Silver (XAGUSD) Technical Analysis

Silver Daily Chart – Positive Price Development

The daily chart for silver shows that the consolidation during April and May has formed a positive price structure. The orange zone highlights this development, where the price remains above the 50-day and 200-day SMAs. This positive setup suggests a strong bullish rally toward the $35 level.

Moreover, the RSI rebounds from the mid-level, further indicating continued upward momentum.

Silver 4-Hour Chart – Positive Development

The 4-hour chart also shows positive price action. The price has repeatedly rebounded from the support level at $31.80, forming a bullish structure.

A break above $33.60 will signal a strong move toward $34.50. Moreover, a breakout above $34.50–$35.00 will likely extend the bullish rally further.

US Dollar (DXY) Technical Analysis

US Dollar Daily – Bearish Pressure

The daily chart for the US Dollar Index shows a strong bearish pattern. This bearish setup has emerged due to the development of a head and shoulders pattern.

The rebound from 98 toward the 50-day SMA at 102 has failed to sustain the rally, and the index has resumed its downward momentum. The weekly close below 100.65 confirms strong bearish pressure.

As a result, the US Dollar Index is likely to continue its downward trend.

US Dollar 4-Hour Chart – Inverted Head and Shoulders

The 4-hour chart for the US Dollar Index shows the formation of a descending channel. The failure at the 101.60 level has triggered another downward move toward the channel’s support.

Strong support lies at 97, and a break below this level would likely initiate a sharp downward momentum towards 90.