Analysis of gold (XAU/USD), silver (XAG/USD)
- Gold is heading lower as US yields and the dollar have lost ground
- XAU/USD is testing a crucial confluence support level
- Silver is testing a well-defined support level as the week draws to a close
- The analysis in this article is used chart patterns and key Support and resistance levels. For more information visit our comprehensive website Educational library
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Gold is heading lower with US yields and the US dollar is recovering lost ground
Gold has turned lower, with the recent rally in the dollar and US yields weighing on the non-interest-bearing metal. The chart below shows the very dynamic that is at play, driving gold lower in the short term, but doubts remain about the longevity of the decline.
Gold falls as 2-year US Treasury yields rise and the US dollar rises
Source: TradingView, prepared by Richard Snow
Gold fell, testing the crucial confluence support level
Gold continues to trade within an ascending channel. The catalyst for the upward move came from the low core inflation reading which seems to have put the US markets into a zero-inflation mode. With progress being made on more steadfast measures of inflation, markets naturally begin to estimate the likelihood of a rate hike after July. Despite the recent directional movement in the dollar, this generally indicates a weakening of the dollar over time provided there are no systemic shocks that would increase recession risks.
Gold is currently testing the confluence of support at 1960 – the intersection of the February 2023 high and the lower bound of the channel. The gold bulls will be looking to this crucial level, hoping for a bounce higher and a push towards the 1985 level. The 1985 year kept high 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 interest level on the downside appears at 1937.
The MACD is indicating that the bullish momentum is still fading while the RSI is heading lower before entering the oversold territory.
Gold Daily Chart (XAU/USD)
Source: TradingView, prepared by Richard Snow
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Silver is testing a well-defined support level as the week draws to a close
Silver, unlike gold, has only seen an upward trend recently. Prior to that time, the precious metal was stuck in a long-term downtrend that started in early May. With us economic inflation The data proved to be the catalyst, silver is up an impressive 7% over the two-day period starting June 12th. Further bullish momentum was hard to come by as prices reject 61.8% Fibonacci Major movement correction 2021-2022 (25.30). Since then, the price has fallen below 24.88 and is currently testing 24.65. Closing above this level is based on the continuation of the potential bullish trend, while breaching and closing below it will focus on 23.89 & 23.22.
Silver daily chart (XAG/USD)
Source: TradingView, prepared by Richard Snow
– Posted by Richard Snow for DailyFX.com
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