Gold and Silver Price Forecast: Oil Surge Tests Key Support Ahead of US CPI

Rising oil prices and inflation fears are keeping gold under pressure near the key $3,950 support area. Silver remains vulnerable below $64, while a break under $55 could expose the $45 support zone.

US CPI data, Fed signals and developments in the US-Iran conflict may determine the next major move in both metals.

Gold (XAU) prices plunged early Monday and dipped below $4,100 as Middle East tensions returned. Oil prices rose on fresh U.S. attacks targeting Iran and as Tehran closed the Strait of Hormuz. Higher energy prices reignited the inflation concerns and reinforced expectations that the Fed will maintain the tight policy. The US dollar also bounced back from the key support that had weighed on gold. Traders are now waiting for the US CPI data and Fed Chairman Kevin Warsh’s testimony for clues regarding inflation and interest rates. If the oil prices, the dollar and Treasury yields remain strong, gold could continue to decline.

Silver (XAG) also follows the gold prices when precious metals continue to decline. But if energy prices stay strong, there could be some support for silver on the industrial side. Higher energy prices accelerate the shift towards renewable energy such as solar. The renewable energy sector uses a massive amount of silver for conductivity. This provides the industrial support for silver.

The short term direction for metals depends on the US-Iran conflict, oil prices and CPI data. The higher inflation data may put further pressure on gold and silv...