The U.S. dollar (DXY) has begun to correct lower from the resistance level of 107, following a strong rally after the recent U.S. elections. Despite this pullback, the dollar remains buoyed by expectations of a less dovish stance from the Federal Reserve. High U.S. Treasury yields, driven by inflationary pressures and anticipated tighter fiscal policies, continue to support the currency. However, geopolitical risks, particularly the ongoing Russia-Ukraine conflict and tensions in the Middle East, have introduced market uncertainty, limiting the dollar’s upside potential and prompting some investors to shift their focus to safe-haven assets.
Gold (XAU) and silver (XAG) are particularly sensitive to geopolitical developments. Recent changes in Russia’s nuclear policy have heightened fears of escalation, while Ukraine’s use of U.S.-supplied ballistic missiles has intensified demand for gold as a safe haven, pushing its price to $2,640 amid rising investor risk aversion. Silver has also rebounded from its support levels and is following a bullish trend.
Market analysts are closely watching upcoming economic data releases, including unemployment claims on Thursday and manufacturing and services PMI data on Friday, which are expected to further influence market sentiment regarding the U.S. dollar, gold, and silver. Given the current geopolitical crisis, gold and silver are likely to remain key assets for risk-averse investors.
The daily chart for gold indicates that prices have been trading within an ascending channel for the past 15 months. The price tends to rebound whenever it touches the 100-day simple moving average (SMA) within this channel. Recent corrections from a record high of $2,790 tested the 100-day SMA and resulted in a bounce higher. This time, the 100-day SMA coincides with a black trendline and ascending broadening wedge supports, marking a significant pivot point for spot gold. A decisive break above the 50-day SMA around $2,656 could trigger further upward movement toward previous record highs.
The 4-hour chart reveals that after reaching a low of $2,526, gold experienced a rebound followed by strong consolidation leading up to the $2,540 resistance area. The relative strength index (RSI) on this chart has remained oversold for an extended period, suggesting that the rebound may continue as gold approaches this resistance level.
The daily silver chart shows that prices have corrected from $34.80 down to a support area within a descending broadening wedge pattern, specifically between $29.80 and $30.20. The low before the rebound was $29.66, which initiated a significant recovery. The emergence of inverted head-and-shoulders patterns during the second and third quarters of 2024 indicates a bullish trend ahead.
The 4-hour chart illustrates that silver’s correction completed within the support area of its descending broadening wedge pattern. The strong rebound from this region indicates price strength and suggests continued upward momentum. An inverted head-and-shoulder pattern supports this bullish outlook, highlighting potential for further gains once prices break above $32.
The daily chart for the U.S. dollar index shows that it is correcting from strong resistance at 107, with support around 105.60. The index remains in a broader consolidation range between 100 and 107, with expectations of a decisive breakout soon as geopolitical tensions continue to influence market dynamics.
The 4-hour chart indicates that the U.S. dollar index has faced resistance at an ascending channel and is currently consolidating with immediate support in the range of 105.60 to 105.20.
As traders navigate these developments, both gold and silver are expected to attract continued interest as safe-haven assets amid ongoing geopolitical uncertainties.
Read more:
