Gold Correction Amid Technical Concerns, Yet Central Bank Buying Provides Foundation

Market Pullback Reflects Profit-Taking at Technical Resistance

On January 7th during US trading hours, precious metals futures experienced a notable retreat, with gold and silver both declining from recent elevated levels. February gold futures settled at $4,467.2 per ounce, posting a loss of $28.9, while March silver futures traded at $78.22 per ounce, down $2.819. The pullback primarily stems from short-term traders capitalizing on gains following the recent rally, combined with strong resistance barriers positioned near all-time highs above current market levels.

Silver’s Technical Pattern Signals Potential Reversal Risk

Daily chart analysis of Comex silver futures reveals an emerging bearish double-top reversal formation, particularly evident after this week’s sharp decline. For this pattern to be confirmed, March silver futures must breach below the trough level separating the two tops, specifically closing beneath $69.255 per ounce. Numerous stop-loss sell orders are likely clustered below this critical technical support level. If confirmed, this pattern could establish a meaningful reversal signal for the precious metals complex, with silver’s price action historically leading directional moves in gold.

Central Bank Demand Sustains Long-Term Gold Trajectory

Despite near-term technical headwinds, structural support for gold prices remains intact. The People’s Bank of China has consecutively increased its gold reserves for 14 consecutive months, underscoring persistent official sector accumulation even as prices reached record levels. December’s addition of 30,000 ounces brought the central bank’s cumulative acquisitions to approximately 1.35 million ounces (42 tons) since the current buying cycle commenced in November 2024. This ongoing institutional demand, combined with geopolitical uncertainties and portfolio reallocation from traditional bonds and currency holdings into alternative stores of value, propelled gold to its strongest annual performance since 1979.

Technical Levels Define Near-Term Trading Range

For February gold futures, bulls are targeting a break above the significant resistance at the contract high of $4,584.00 per ounce, while bears aim to push prices below the support level at $4,200.00. Intermediate resistance appears at the overnight high of $4,512.40 and the psychological level of $4,550.00, with the first support established at today’s low of $4,432.90 and secondary support at $4,400.00.

March silver futures present a more challenging technical picture, with the potential double-top reversal weighing on bull confidence. Upside targets remain positioned at the record high of $82.67 per ounce, while bears have identified the previous week’s low of $69.225 as a critical breakdown level. Immediate resistance sits at $79.00 and $80.00, with support levels at $75.70 and $75.00 respectively.

Market Context and External Factors

The US dollar index strengthened modestly, while crude oil traded around $56.50 per barrel. The benchmark 10-year Treasury yield settled near 4.15%, reflecting ongoing adjustments in the broader macro environment that indirectly support precious metals valuations.