Gold, Silver Outlook: US Dollar strength, higher yields drag metals to key supports

• Dollar strength and higher U.S. yields weigh on precious metals
• Trump’s Ukraine push saps safe haven and Russian demand flows
• Gold testing wedge support, silver clinging to 50DMA

Gold, Silver Outlook Summary

Gold and silver are under pressure with firmer U.S. dollar and higher Treasury yields weighing on sentiment. Traders appear to be positioning for Jerome Powell to push back against market pricing that sees a near-certain rate cut next month, keeping front-end yields elevated and reducing the appeal of non-interest-bearing assets.

Another undercurrent is Donald Trump’s push to end the Ukraine war, a move that not only dents safe haven demand but also carries implications for capital flows. For Russia, where gold has been a preferred vehicle to sidestep banking sanctions and capital controls, the risk is that demand could soften should a settlement be reached.

These fundamental headwinds are now being reinforced by technical signals, adding weight to the case for further downside in precious metals.

Gold Bears Eye Downside Break

Source: TradingView

Gold continues to grind lower within what resembles a bull pennant pattern, moving to within touching distance of uptrend support following the latest pullback. The three-candle evening star pattern printed in early August proved to be a pertinent signal for what’s been seen since, as was the morning star delivered late July and bearish engulfing candle two weeks earlier.

The reliability of these market signals makes gold’s location on the chart all the more interesting, with the price now encroaching on the intersection of horizontal support at $3310 and uptrend from May lows. As yet, there’s no sign of an imminent bullish reversal, meaning a test of this support zone could be on the cards today. With momentum indicators having already shifted from bullish to mildly bearish, traders should be alert to the risk of a downside break.

If that eventuates, $3268 was the swing low set in late July, making that screen as an initial target. Beyond, $3250 is a more pronounced support level, coinciding with where the gold price bounced strongly in May and June. Alternatively, if the price bounces from the support zone, $3334 and $3376 are minor resistance levels before wedge resistance kicks in just beneath $3400. If a bullish reversal were to occur from around current levels, it would increase the risk of a topside wedge break as convention would suggest, putting a potential retest of the record highs at $3500 on the menu.

Silver Slides to 50DMA

Source: TradingView

Silver finds itself resting on the key 50DMA, a level traders have used as a launchpad for bullish moves on the last two occasions of testing. However, with unconvincing price action and momentum indicators turning neutral, it may be a case of third time lucky for bears on this occasion.

Silver has already broken beneath the February 2012 high of $37.46, which has acted as something akin to a dividing line for price action since first being crossed in July—a small win for bears seeking a deeper pullback. But given how often bears have attempted to break beneath the 50DMA only to see the price reverse back in their face, to bolster the case for shorts it would be preferable to see a close beneath the level before establishing bearish positions. Potential targets include $36.27 and $35.50. A stop above either the 50DMA or $37.46 would offer protection against reversal.

If the 50DMA holds firm again, the setup could be flipped with longs established above the level with a stop beneath for protection. $38.73 screens as an initial target having acted as both support and resistance in July and August.