Gold (XAU/USD), Silver (XAG/USD) Analysis

• Gold heads lower as US yields and the dollar recover lost ground
• XAU/USD pullback tests crucial level of confluence support
• Silver tests well-defined support level as the week comes to a close
• The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

Gold Heads Lower as US Yields and the US Dollar Recover Lost Ground

Gold has turned lower, with the recent lift in the dollar and US yields weighing on the non-interest-bearing metal. The chart below shows the very dynamic at play, sending gold lower in the short-term, but doubts remain around the longevity of the decline.

Gold dips lower as US 2-year treasury yields and USD rise

Source: TradingView, prepared by Richard Snow

Gold Pullback Tests Crucial Level of Confluence Support

Gold continues to trade within an ascending channel. The catalyst for the bullish move appeared via a welcomed print lower in core inflation which appears to have sent US markets into disinflation mode. With stickier measures of inflation making progress, markets naturally begin to price out the likelihood of further rate hikes beyond July. Despite the recent directional move in the dollar, this generally points to a weaker dollar over time provided there are no systemic shocks that would elevate recession risks.

Gold currently tests the confluence support level at 1960 – the intersection of the Feb 2023 high and the lower bound of the channel. Gold bulls will be eying this crucial level, hoping for a bounce higher and a push towards the 1985 level. 1985 kept higher prices at bay when gold was trading within a sideways channel between mid-May and mid-June. If prices break and close below 1960, the nearest level of interest on the downside appears at 1937.

The MACD index suggests that upside momentum remains in paly while the RSI heads lower before even entering into oversold territory.

Gold (XAU/USD) Daily Chart

Source: TradingView, prepared by Richard Snow

Silver Tests Well-Defined Support Level as the Week Comes to a Close

Silver, unlike gold, has only witnessed its bullish more recently. Before then, the precious metal had been stuck within a longer-term downtrend ever which had begun in early May. With US inflation data proving to be the catalyst, silver has risen an impressive 7% over the two-day period beginning on June the 12th. Further bullish momentum has been hard to come by, seeing prices reject the 61.8% Fibonacci retracement of the 2021-2022 major move (25.30). Since then, prices dropped below 24.88 and currently test 24.65. A close above this level is constructive for potential bullish continuation while a break and close below brings 23.89 and 23.22 into focus.

Silver (XAG/USD) Daily Chart

Source: TradingView, prepared by Richard Snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX