Gold and Silver Eye Bullish Breakouts; US Dollar Holds Key Levels

Gold (XAU) prices rebound sharply from the strong support level of $2,730, showing renewed strength. This recovery follows a sharp decline on Monday, triggered by disruptions caused by the Chinese AI startup DeepSeek, which wiped out over $500 billion in Nvidia’s market capitalization. Bitcoin (BTC) also experienced significant volatility, reflecting broader market turmoil. The commodities market remains volatile as financial markets continue to absorb the impact.

This situation aligns with US President Donald Trump’s push for global tariffs to protect American tech firms from China’s market tactics. Tariffs typically drive inflation, leading to higher yields. However, economic uncertainty has increased the safe-haven demand for gold. Meanwhile, the US dollar index (DXY) found support at 107, benefiting from tighter financial conditions and shifting investor sentiment.

On the other hand, new orders for US durable goods decreased by 2.2% month-over-month to $276.1 billion in December 2024. The chart below shows this decline has persisted for the past two months. The drop was primarily driven by transportation equipment, which fell by 7.4%. Nondefense aircraft and parts experienced a sharp 45.7% decline, likely due to reduced bookings for Boeing. Weak durable goods data could pressure the US dollar, reflecting softer economic activity and influencing monetary policy expectations. The Federal Reserve is scheduled to announce its interest rate decision on Wednesday, which will be the key event for the US dollar. The next direction for the US dollar index will likely drive the next move in gold and silver (XAG).

Gold (XAU) Technical Analysis

Gold Daily Chart – Bullish Breakout

The daily chart for gold shows that the price reversal from $2,730 has formed a bullish pattern. Specifically, the price structure indicates the formation of a double bottom, with the neckline at $2,720–$2,730 serving as strong support. Following this rebound from $2,730 on Tuesday, the stage is set for a potential breakout above $2,790. Furthermore, the RSI is currently at 63, which suggests the possibility of continued upward momentum. If a breakout above $2,790 occurs, it could extend the rally toward the $3,000 mark.

Gold 4-Hour Chart – Ascending Channel

The 4-hour chart for gold shows that the price is trading within an ascending channel. Meanwhile, the correction from $2,785 has reached the ascending channel’s support level. Consequently, a rebound from this support suggests the continuation of upward momentum.

Silver (XAG) Technical Analysis

Silver Daily Chart – Positive Price Development

The daily chart for silver shows that the price is consolidating above the 200-day SMA, clearly indicating bullish momentum. Furthermore, this consolidation has formed a bullish price pattern, which suggests that silver is preparing for a major rally. Consequently, a breakout above $32.50 could trigger a swift move to $35 and potentially pave the way for a rise toward $50.

Silver 4-hour Chart – Breakout Potential From Consolidation Zone

The 4-hour chart for silver shows the price consolidating within the orange zone, which increases the potential for a breakout above the descending channel. The upper range of the orange zone is $31. A breakout above $31 will open the door for a quick move to $32.50. Moreover, a sustained break above $32.50 could signal a move toward $35.

US Dollar Index (DXY) Technical Analysis

US Dollar Daily Chart – Rebound from Key Level

The daily chart for the US dollar shows that support has been found at a key level of 107 and is rebounding. The US Dollar Index closed above the 50-day SMA, maintaining positive momentum. However, uncertainties surrounding President Trump’s policies and the upcoming monetary policy decision will likely drive the US dollar’s direction. A break below 107 could signal a move toward 105.60.

US Dollar 4-Hour Chart – Ascending Broadening Wedge

The short-term price action for the US Dollar Index shows significant uncertainty. It initially broke below the ascending broadening wedge but then reversed higher to close within the wedge. The RSI has closed above the mid-level, keeping bullish momentum intact. However, a break below 107 could trigger a further downside correction for the US dollar.