Gold and Silver pull away from daily lows as US PMIs drop

XAU/USD threatens to drop below $2,300 for the first time in two weeks as easing geopolitical tensions drives investors away from safer assets. Equities have been attempting to recover this week as risk appetite increases, meaning investors are moving away from safe havens like the US dollar and gold, pulling away from their recent highs on Monday.

Profit-taking is also likely driving the pullback, as investors close out their profitable positions ahead of an anticipated bearish correction. Technically, the correction is long overdue, with the Relative Strength Index (RSI) having been in overbought territory for almost a month. The upward trend remains intact, with the medium-to-long-term bias still firmly on the upside. Investors have already started to show interest in buying the dip in gold as it pulls away from the lows throughout the Session on Tuesday. At the time of writing, XAU/USD is up 1.2% from the daily lows. Weaker-than-expected US PMI data has helped as the data showed the manufacturing industry slipped into contraction in April, a stark contrast to the resilience in most of the recent US economic data.

Gold (XAU/USD) daily chart

Past performance is not a reliable indicator of future results.

Whilst the overall sentiment in gold remains bullish, there may be a chance for further pullbacks this week as the US GDP and PCE data is released. Strong-than-expected readings are likely going to reaffirm the expectations that the Fed will have to continue pushing back on rate cuts, potentially seeing only one, or even none, this year. This could bolster the dollar, putting further pressure on XAU/USD.

How geopolitical tensions evolve will also continue to play a key role in precious metals, including Silver. XAG/USD dropped 5% on Monday as the easing of tensions has created a headwind for the pale metal. Investors are likely happy to wait on the sidelines until the latest economic data is revealed in an attempt to gauge how market sentiment evolves. That said, the daily chart also shows increased buying interest on Tuesday after the strong selloff on Monday, indicating support is strong around current levels.

As with gold, the pullback in silver currently looks like a technical correction and not a change in momentum. The ascending trendline support from the February 29th lows is currently placed around $26.20, an area new buyers could be targetting for reversal if the selling pressure continues. For now, $26.65 seems to be the level for sellers to beat in the short term.

XAG/USD daily chart

Past performance is not a reliable indicator of future results