Gold, Silver, US Dollar Technical Analysis: Inflation, Geopolitical Risks, and Market Drivers

Gold (XAU) has dropped to seven-week lows below $2,600, finding support from an ascending broadening wedge formation. This pressure on gold is due to the strength of the US Dollar following the presidential election. The recent rise in the Dollar stems from market optimism around Donald Trump’s economic policies. These policies are expected to benefit the Greenback.

Trump’s proposed economic policies, including import tariffs, tax cuts, and strict immigration measures, are expected to fuel inflation. This increase in inflation could impact various sectors across the United States. The rising inflation could prompt the Federal Reserve to slow its rate cuts, negatively impacting gold. Today’s inflation figures will further drive the US dollar, gold, and silver (XAG).

Gold also faces competition from Bitcoin, hitting new highs fueled by hopes for looser crypto regulations. Meanwhile, US stocks are gaining from the possibility of corporate tax cuts and deregulation. Additionally, Trump’s claim that he could swiftly end the Ukraine-Russia war has diminished safe-haven demand for gold. Some investors expect reduced geopolitical risks with Donald Trump’s election as president. However, tensions in the Middle East continue to support gold’s safe-haven appeal amid ongoing uncertainties.

Gold (XAU) Technical Analysis

Gold Daily Chart – Support Region

The daily chart for gold shows that the price correction began from the strong resistance at $2,790 at the red-dotted trendline. The price is currently testing the support of the ascending broadening wedge and the mid-trendline of the ascending channel at $2,595.

The overall trend remains strongly bullish, with the price attempting to find support in the $2,540 to $2,595 zone before the next strong move toward $2,800. Higher inflation concerns and strong demand for Bitcoin have shifted investors’ focus to cryptocurrencies. This shift has resulted in a drop in gold. However, inflation is likely to trigger a bullish bias in the gold market. A price correction is considered a buy signal.

Gold 4-Hour Chart – Short-Term Support

The 4-hour chart for gold shows that the price correction began after forming an inverted head and shoulders pattern at $2790. The price is now approaching the support of the black trendline. The RSI is nearing oversold conditions, indicating that a short-term rebound might develop.

Silver (XAG) Technical Analysis

Silver Daily Chart – Support of Descending Broadening Wedge

The daily silver chart shows that the price correction from the $34.80 resistance has brought the price back to the descending broadening wedge support. The immediate support for spot silver is the zone of $29.80-$30.20. This support aligns with the support of the descending broadening wedge pattern. A break below $29.80 could push the price toward the 200 SMA at $28.58.

Silver 4-hour Chart – Descending Broadening Wedge

The price correction in spot silver has formed a descending broadening wedge pattern. The 4-hour chart validates the daily support at $30.20, where the lower line of the descending broadening wedge extends. The oversold RSI consolidates below the mid-level, indicating further consolidation before the next move higher.

US Dollar Technical Analysis

US Dollar Daily Chart – Breaks Resistance

The US Dollar Index has broken above 105.60, a strong resistance level formed by the trendline stretching from the October 2023 highs. This breakout opens the door for a rally toward the April 2024 high of around 106.50. A move above this level could pave the way for a long-term rally, signalling a strong upward trend. Today’s CPI data will provide further insight into inflation figures and indicate the next move in the US dollar.

US Dollar 4-Hour Chart – Ascending Channel

The 4-hour chart for the US Dollar Index shows the formation of an ascending channel, with the index trending higher. The 4-hour chart also validates the target of 106.50, where the index faces resistance at the upper channel line.