Gold, XAU/USD, Silver, XAG/USD – Price Action & Outlook:
- XAU/USD is attempting to break below a vital support.
- XAG/USD is nearing quite a strong cushion.
- What is the outlook and what are the key levels to watch in XAU/USD and XAG/USD?
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Gold and silver are approaching a crucial juncture that could define the trend for subsequent weeks, perhaps months.
Precious metals have been weighed by elevated real yields amid the growing view that interest rates will remain higher for longer given stubbornly high inflation. Data published on Thursday showed US CPI rebounded to 3.2% on-year in July from 3.0% in June, while core inflation eased marginally to 4.7% on-year last month from 4.8% previously.
Even though the moderating trend in price pressures is encouraging, with each reading the bar for Fed interest rate cuts beginning mid-2024 appears to be rising. Indeed, the risk of further tightening remains — media reports quoted San Francisco Fed President Mary Daly saying there is more work to be done by policymakers.
XAU/USD Daily Chart
Chart Created by Manish Jaradi Using TradingView
Rising nominal interest rates coupled with easing price pressures/inflation expectations have pushed up real rates, raising the opportunity cost of holding the zero-yielding yellow metal. See “High Real Yields Starting to Bite Gold? XAU/USD Price Setup Ahead of US CPI,” published August 10.
XAU/USD Weekly Chart
Chart Created by Manish Jaradi Using TradingView
Gold: At crossroads
On technical charts, the back-to-back doji candlesticks formed on the weekly charts in late July coupled with the sharp fall over the past two weeks raise the risk of a lower high being created in XAU/USD – the first time since the uptrend began in 2022. Importantly, it would raise the odds that the spectacular multi-month rally is corrective and not the start of a new uptrend – a point highlighted in recent months. See “Gold Could Find It Tough to Crack $2000”,published March 28, and “Gold Weekly Forecast: Is it Time to Turn Cautious on XAU/USD?” published April 16.
On the weekly charts, gold is threatening to break below a vital cushion on the 200-day moving average, the June low, and the lower edge of a rising channel since early 2023 (see the weekly chart). Any break below could pave the way toward the February low of 1805. Importantly, it would establish a lower-high-lower-low sequence from early 2023.
XAU/USD Monthly Chart
Chart Created by Manish Jaradi Using TradingView
Earlier in July, XAU/USD failed to rise above stiff resistance at the early-June high of 1983, slightly below the upper edge of the Ichimoku cloud on the daily charts – a risk pointed out in late July. See “Is Gold’s Rebound Over Ahead of FOMC? XAU/USD Price Setups,” published July 25. The failed attempt to break above the hurdle opened the way toward the June low of 1892 – a risk pointed out in the previous update. See “Gold and Silver Forecast: Rate Hikes Weigh on XAU/USD, XAG/USD,” published July 30.
XAG/USD Monthly Chart
Chart Created by Manish Jaradi Using TradingView
XAG/USD: Approaching vital support
XAG/USD’s failure to rise past the mid-point of a rising channel from late 2022, coinciding with a slightly downward-sloping trendline from 2020 could be an early warning sign of cracks in the uptrend from 2022.
XAG/USD Weekly Chart
Chart Created by Manish Jaradi Using TradingView
Silver is now testing a crucial support zone: the lower edge of the rising channel, slightly above the June low of 22.10. Any break below could pave the way toward the March low of 19.75. Importantly, it would establish a lower-high-lower-low sequence, reinforcing the bearish picture prevailing since 2021.
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— Written by Manish Jaradi, Strategist for DailyFX.com
— Contact and follow Jaradi on Twitter: @JaradiManish