Gold, Silver, US Dollar Technical Analysis: Key Levels to Watch Amid Market Volatility

Inflation has moderated to around 3%, and the Fed has cut interest rates by 1% from their 2024 peak to stimulate the economy. However, inflation could rise again due to escalating geopolitical tensions, which drive up energy prices and increase energy CPIs. The chart below shows headline CPIs trending upward toward 3.0% after the Fed lowered the interest rates.

Moreover, the bond market stabilized ahead of Donald Trump’s inauguration as core inflation data eased to +0.2% m/m. Despite renewed inflation fears following Trump’s win, there is no strong evidence of concern, and the Fed is expected to cut rates again.

Additionally, economic recoveries in China, Europe, and the US fuel demand further pressuring prices. US sanctions on Russian oil have impacted the energy market, pushing WTI crude oil (CL) to $80 and Brent crude oil (BCO) to $81. This volatility in energy prices continues to pose risks to inflation stability. Rising energy prices could drive up the prices of gold (XAU) and silver (XAG) as investors seek safe-haven assets. Sustained increases in inflation and energy costs may reinforce the appeal of these commodities in the face of economic uncertainty.

The Fed has reduced its securities holdings by $2 trillion, tightening liquidity and adding stress to financial markets. Concerns over the sustainability of US federal debt and persistent deficits are pushing Treasury yields higher, signaling a prolonged bond bear market. These factors and inflationary pressures create a favorable environment for gold as a safe-haven asset.

The gold market found support following last week’s US inflation and retail sales data. However, the price failed to break above $2,720, leaving the market seeking direction around this critical level. A decisive move above or below this point could determine the next trend for gold prices.

Gold (XAU) Technical Analysis

Gold Daily Chart – Ascending Broadening Wedge

The daily chart for gold shows that the price is trading within an ascending broadening wedge pattern and has rebounded from the $2,580 support level. The price has now reached the black dotted trendline at $2,720, considered a key resistance level. A break above $2,720 is necessary for gold to initiate its next upward move.

Gold 4-Hour Chart – Symmetrical Triangle

The 4-hour chart for gold shows that the price is consolidating after hitting the $2,720 level. The breakout from the symmetrical triangle was bullish; however, the price must break above $2,720 to initiate the next upward move in gold.

Silver (XAG) Technical Analysis

Silver Daily Chart – Falling Wedge Pattern

The daily chart for silver shows that the price failed to break out of the falling wedge pattern and continues to trade within its apex. However, the price is consolidating above the 200-day SMA, and the RSI remains above the mid-level of 50, indicating bullish price action.

Silver 4-hour Chart – Descending trendline

The 4-hour chart for silver shows that the price failed to break above $30.70 last week and is now consolidating. Further consolidation is likely as long as the price remains below $32.50. A break above $32.50 would pave the way toward $34.80.

US Dollar Index (DXY) Technical Analysis

US Dollar Daily Chart – Bullish Momentum

The daily chart for the US Dollar Index shows that the index recovered on Friday and initiated a strong rebound. Moreover, the Friday candle formed a reversal pattern, signaling a potential continuation of bullish momentum. The 50-day SMA remains above the 200-day SMA, indicating strong bullish momentum.

US Dollar 4-Hour Chart – Ascending Channel

The 4-hour chart for the US Dollar Index shows that the index is trading within an ascending channel, forming bullish price action. The channel support held strong at the 108.80 and 109 levels, with the index rebounding from this support to higher levels. A positive development around this support suggests a potential move toward the 111.90 level.