XAU/USD Rises on a Softer Dollar, Silver Withers

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

Dollar Down, Gold up

Gold appears to be taking its cue from a marginally weaker dollar at the start of the holiday-shortened trading week. Last week, gold prices revealed a rather unconventional evening star pattern – a typically bearish formation which can occur at the top of an uptrend. It was unconventional in the sense that the middle ‘doji’ candle exhibited a large upper wick but the candle body still met the technical criteria.

The dollar may simply be cooling off after a choppy end to the week, initially sinking post-FOMC then rising sharply in the days that followed. Incoming inflation data on Friday is the main piece of scheduled event risk this week, meaning catalysts may be limited until then. Friday is a bank holiday in the UK and the US, potentially setting up a volatile USD move if the data posts a surprise amid a lower liquidity backdrop.

Daily Gold Chart Compared with the US Dollar Basket (DXY)

Source: TradingView, prepared by Richard Snow

Gold Retests Prior 2024 All-Time High

Gold prices attempted to close above $2195, the all-time high printed earlier this year before the latest milestone around $2222. This appears as a test for bullish momentum with a failure to close above suggesting that bullish momentum may require another catalyst to advance the bullish move.

$2146 appears as the relevant level of support if bears are to regain control this week. To reiterate, Friday may cause elevated volatility should we see a surprise in the data – due to lower liquidity.

Gold (XAU/USD) Daily Chart

Source: TradingView, prepared by Richard Snow

Silver Found Resistance and Continues to Trickle Lower

Silver just fell short of tagging the $26.10 level – a consistent ceiling for the commodity going back to mid-2023. Since then, prices have fallen through the 61.8% Fib retracement of the 2021-2022 decline at $25.30 and the psychological $25 handle. Downside levels of interest from here emerge at the 50% retracement (not typically regarded as a significant level), followed by the 38.2% retracement all the way down at $22.35.

Silver Weekly Chart

Source: TradingView, prepared by Richard Snow

The daily chart reveals the immediate test for bearish momentum at $24.55, a level that had previously served to limit upside potential.

Silver Daily Chart

Source: TradingView, prepared by Richard Snow

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— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX