Market analysis: Gold struggles to find direction, Silver fails to hold its gains

Gold is facing an increase in selling pressure on Tuesday morning as the precious metal struggles to break away from the sideways range that has been forming in the past few weeks. XAU/USD remains supported around $2,325 as ongoing geopolitical tensions and hopes for rate cuts from central banks keep demand high, but the upside has been limited by stronger yields in the US.

That said, gold has failed to regain the upper hand even as US yields have retreated significantly in the past three days, suggesting the appetite for portfolio diversification has subsided. The fact that equities continue to push higher evidences good risk appetite, weighing on safe havens like gold. 

The focus will likely be on the US jobs data released this Friday. After months of positive surprises, economic data in the US has started to show some signs of weakness. Monday’s manufacturing data slipped further into contraction, missing expectations of a minor rebound. Friday’s jobs data is expected to come in mostly unchanged from the previous month. With inflation pressures still a concern, average hourly earnings are likely to remain a key focus. A weaker-than-expected reading could reignite hopes of a rate cut from the Fed this year, which could support gold further. Bullish support could also arise if the ECB cut rates on Thursday as widely expected. 

Technically, XAU/USD continues to find support at the 23.6% Fibonacci retracement ($2,326) from the April 12 highs ($2,431). Alongside resistance at $2,36 XAU/USD has been constricted to a tight range for the past week, failing to garner enough momentum to break on either side. The RSI has also been limited around the 50 line which evidences a lack of direction. 

Gold (XAU/USD) daily chart

(Past performance is not a reliable indicator of future results.)

Meanwhile, silver (XAG/USD) has been retracing its recent gains. We could see a double bottom pattern forming depending on how the chart evolves on Tuesday, suggesting further upside may ensue. So far, support remains between 29.30 and 29.45. The ascending trendline from the February 29 low is also looming close, reinforcing the possible support. 

Silver (XAG/USD) daily chart

(Past performance is not a reliable indicator of future results.)