Gold, silver outlook: Sandwiched between bullish bonds and AI angst

• Treasury futures threaten a bullish breakout
• AI trade increasingly linked to yields, DXY
• Gold and silver correlations with Nasdaq surge
• Technicals still favour selling into strength

Gold and silver bounced on Monday following Friday’s shellacking, helped by a steep decline in crude oil futures that sent US Treasury yields lower across the curve. The continued rally in Treasuries now has benchmark futures on the cusp of a bullish breakout, an outcome that would normally go hand in hand with renewed weakness in the US dollar. Both developments would ordinarily be bullish for precious metals.

But there's a catch. Gold and silver have recently traded more like tech stocks than traditional havens, raising questions about whether they can benefit from an environment of lower yields and a softer US dollar, should the AI trade continue to unravel.

Have Treasury yields peaked?

Source: TradingView

US Treasury bonds appear to have bottomed, but whether that marks "the bottom" for the cycle could well be determined by price action in the coming days. Benchmark ten-year Treasury note futures are now testing a downtrend that's been in place since the highs set in early March, broadly coinciding with the start of the conflict between the US and Iran.

While it's too soon to declare a bottom for this cycle, particularly in an environment of still-elevated inflationary pressures, energy prices and longer-term fiscal concerns, a break of the downtrend would strengthen the case that we've likely seen the highs for Treasury yields this cycle.

Falling US yields could weigh on dollar

A sustained breakout in Treasury futures would ordinarily point to further downside in US yields, potentially weighing on the dollar given the positive relationship between the two. 

Over the past 120 sessions, DXY has shown its strongest daily correlation with the US two-year yield at +0.46, compared with +0.39 for the five-year and +0.32 for the ten-year. However, the relationship has shifted further out the curve recently, with the ten-year yield showing the strongest correlation over the past 20 sessions at +0.46.

The AI connection

While Monday's decline in US yields was largely driven by sharply lower energy prices, over a longer time frame, it's clear that markets are using the AI trade as some form of proxy for the US nominal growth outlook, influencing not only expectations for Federal Reserve interest rates, but also Treasury yields further out the curve.

As sentiment towards the AI trade deteriorates, Treasury yields and the US dollar have tended to move lower, and vice versa. The relationship is evident in the chart below, with the 20-day rolling correlation between Nasdaq 100 futures and US two, five and ten-year Treasury yields strengthening to +0.63, +0.64 and +0.58 respectively, while the equivalent correlation with DXY has turned positive at +0.23.

Source: LSEG

The relationships have strengthened even further over the past ten sessions, with correlations against two, five and ten-year Treasury yields climbing to +0.78, +0.82 and +0.76 respectively, while the correlation with DXY has risen to +0.63.

The precious metals conundrum

However, before loading up on gold and silver in anticipation of far more forgiving historic macro environment, there's just one problem: the traditional relationships between precious metals, the US dollar and Treasury yields have gone to mush recently.

As the chart below shows, the inverse relationship between gold and the US dollar index has essentially disintegrated over the past month. The 20-day rolling correlation now stands at just -0.09 for gold and -0.20 for silver. That's a far weaker relationship than what we've seen over longer-term time horizons.

Source: LSEG

As the chart below shows, both metals are now trading increasingly in lockstep with technology indices, with the daily correlation between gold and Nasdaq 100 futures climbing to +0.77 over the past ten sessions, with silver not far behind at +0.71.

Source: LSEG

While both metals have traded like risk assets on occasion, especially around the turn of the year, the strength of the recent relationship with technology stocks points to the possibility of forced selling, either to cover losses in precious metals themselves or positions in other asset classes.

As such, precious metals traders face a conundrum. While a deeper correction in technology stocks could drive Treasury yields and US dollar lower, providing what would normally be a bullish backdrop for metals, if gold and silver continue to trade like tech equities, the same selling loop we've seen recently could persist for some time yet, opening the door to even greater losses beyond those already seen.

My sense is that the traditional inverse relationship between precious metals, the US dollar and Treasury yields will eventually reassert itself. And while there has been a necessary clearout of more speculative elements in the AI sector, the broader revenue numbers being delivered by the key players are still phenomenal. So unless you think we're heading for a real bloodbath in tech, perhaps the balance of risks for gold and silver is starting to shift back towards the upside.

However, while the macro argument may be starting to favour the bulls, the technical picture is telling a different story. 

XAU/USD: Bears remain in control

Source: TradingView

Looking at the XAU/USD daily chart reinforces why caution is still warranted when considering playing from the long side, with the price sitting beneath all its key medium and long-term moving averages, all of which have a negative slope. The price also remains in a downtrend, having recently fallen to levels not seen since September 2025. So even though we saw a rebound on Monday, it's still far too early to declare a turning point in the trend.

Overhead, $3,975.64 is the first level to watch. That was the low hit in late October, with the price coming very close to tagging it during Monday's session before reversing lower. If reclaimed, the next focal point would be the confluence of downtrend resistance running from the high set in early September, the 38.2% Fibonacci retracement of the 2022–2026 bull move, and horizontal resistance at $4,066.57. A bullish breakout above that zone would shift directional risk towards the upside.

However, in the interim, the message from the price action and oscillators continues to favour selling into strength. If the price cannot reclaim $3,975.64, it could provide an opportunity to establish shorts beneath with a tight stop above, targeting Monday's low of $3,875.65. Below that, $3,791 is the next downside level to watch, having acted as minor resistance prior to the breakout in September last year.

XAG/USD: Downside risks still dominate

Source: TradingView

XAG/USD sits in much the same boat as XAU/USD, having hit multi-month lows on Friday after falling to levels not seen since November last year. The level tagged on Friday is an important one, not only marking a zone that acted as support and resistance on multiple occasions late last year, but also the 78.6% Fibonacci retracement of the April 2025 to January 2026 bullish move.

The confluence makes it an important technical level on the downside. If breached, $45.56, the swing low set on 28 October last year, would be the next focal point, followed by $42.97, another minor level that previously acted as resistance prior to a breakout in the final quarter last year.

Overhead, the first level of note is the confluence of minor downtrend resistance running from the high set in late December and horizontal resistance at $54.50. A bullish break above that zone would put $58.50 on the radar, followed by the 150-day moving average, currently sitting just above $61.

As if it wasn't already obvious from the price action, the oscillators also favour selling into strength and downside breaks. RSI (14) continues to set lower lows without sitting at extreme levels, while MACD has staged a bearish crossover and continues to move further into negative territory.

Of the two metals, the technical picture makes it harder to get excited about the upside prospects for silver relative to gold.