Gold continued its decline during the Asian trading session on Monday, slipping to a one-week low of $3,259 before recovering slightly to $3,278. This recent weakness reflects a combination of improving risk sentiment, a stronger US dollar, and easing recession concerns, all of which have reduced investor demand for traditional safe-haven assets like gold.
The downward momentum comes as trade negotiations between the United States and China show signs of progress. Positive developments over the weekend have calmed market jitters, prompting a shift away from defensive assets and into riskier investments such as equities. This shift has been reinforced by the US dollar’s continued strength.
The dollar index, which tracks the greenback against six major currencies, remains near a one-month high. A stronger dollar typically exerts downward pressure on gold by making it more expensive for non-US investors, further dampening demand for the precious metal.
Silver Mirrors Gold’s Struggles as Risk Appetite Grows
Silver is also under pressure, currently trading around $32.91. Despite ongoing geopolitical uncertainties, silver is struggling to regain bullish momentum as investors favor risk assets amid improving global economic sentiment. Nevertheless, the metal has managed to hold above the critical support level of $32.75, indicating that buyers remain active at lower price points.
Silver has declined nearly 3% from its monthly high of $33.85, reflecting the broader market’s shift toward riskier assets. The metal’s performance will likely remain tied to the strength of the dollar and evolving risk sentiment in the coming sessions.
Eyes on US Inflation and Fed Policy Guidance
Looking ahead, market participants are focused on key economic data releases and Federal Reserve policy signals. The upcoming US Consumer Price Index (CPI) report, scheduled for release this week, is expected to show a 4.1% year-over-year increase. Persistently high inflation could influence the Fed’s monetary policy outlook, affecting both gold and silver prices.
Additionally, Fed Chair Jerome Powell’s speech on Thursday will be closely monitored for any hints regarding the future trajectory of interest rates. Investors will be watching for signs of whether the Fed will maintain its current stance or signal potential rate cuts later this year.
Technical Analysis: Gold at a Critical Juncture
Technically, gold is testing a key support zone after breaking below its 50-day Exponential Moving Average (EMA) at $3,326. The recent drop signals a shift in market sentiment, with bearish momentum gaining strength as gold struggles to sustain its previous uptrend.
The $3,259 level is a critical support, aligning with a long-term ascending trendline. A decisive break below this level could trigger a deeper correction, with downside targets at $3,211 and potentially even $3,169 if selling pressure accelerates. Conversely, a recovery above $3,326 would be needed to signal a potential reversal and restore bullish momentum.
Silver Price Outlook: Key Levels in Focus
For silver, the $33.00 level represents a significant resistance zone, coinciding with the upper boundary of a descending triangle pattern. A breakout above $33.25 would confirm bullish momentum and open the path toward the next resistance level at $34.08.
However, failure to break this resistance could lead to a pullback toward the $32.65 support level, reinforced by the 50-day EMA. If this support fails, further declines toward $32.23 or even $31.88 are possible. Traders should closely monitor price action around $33.25 for breakout confirmation, while keeping an eye on the 50 EMA as a gauge of trend strength.
Short-Term Forecast Summary
Gold (XAU/USD): Bearish bias below $3,259, with potential downside toward $3,211 and $3,169. Recovery above $3,326 needed for bullish reversal.
Silver (XAG/USD): Consolidating near $32.91; breakout above $33.25 could confirm uptrend. Failure to break resistance risks pullback to $32.65 and lower levels.
Both metals remain sensitive to macroeconomic developments, particularly US inflation data and Federal Reserve commentary, which could dictate near-term price direction.
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