The value of gold and silver undergoes correction: the bulls face a critical technical setup for silver.

On Wednesday, January 7th, in U.S. exchanges, both gold and silver experienced significant losses in the afternoon. The downward movement was primarily triggered by short-term futures traders taking profits. Technical pressure from all-time high levels pushed long position holders in both precious metals to adopt a more cautious stance during the mid-week trading session.

Price fluctuations and current data

The gold per ounce price saw a sharp decline: the February futures contract fell to $4,467.20 per ounce, a loss of $28.90. Silver experienced an even more significant retreat on the March contract, settling at $78.22 per ounce with a decrease of $2.819. These reductions reflect the volatility characterizing the precious metals market during this time of year.

Technical analysis and bearish signals for silver

The daily chart of the March COMEX contract reveals a potentially concerning setup for bullish traders: the price action of the week, especially today’s sharp decline, may be forming an inverted double top pattern. This bearish structure poses a real threat to bulls if confirmed by subsequent moves.

According to traditional technical analysis, confirmation of this bearish pattern occurs when the price drops below the intermediate low between the two highs. For the silver contract, this means falling below $69.255 per ounce. Reaching this level could trigger numerous pre-set stop-loss orders, further amplifying the bearish pressure.

Critical technical levels for silver and gold

Looking at the March futures for silver: the next technical resistance is at $79.00 per ounce, followed by $80.00 per ounce, while the all-time high of $82.67 remains a significant bullish target. On the downside, the first support level is at $75.70 per ounce, followed by the $75.00 per ounce threshold.

For the February gold contract, the main resistance remains at the contractual/historical high of $4,584.00 per ounce. The first resistance level is yesterday’s high at $4,512.40 per ounce. The primary technical support is at $4,200.00 per ounce, with a nearer support level close to today’s low of $4,432.90 per ounce.

Central bank dynamics and gold demand

A supporting factor for the gold price comes from the Chinese People’s Bank, which continued its accumulation cycle. In January, the Chinese central bank increased its gold reserves by 30,000 ounces, continuing this strengthening policy for the fourteenth consecutive month. Since November 2024, when the purchase cycle began, the total accumulated amounts to approximately 1.35 million ounces of gold, equivalent to 42 tons.

This persistent official demand underscores geopolitical appetite for gold, especially as prices reach all-time highs. This dynamic contrasts with recent volatility, but the annual performance of gold remains impressive, representing the best performance in nearly half a century (since 1979).

Broader market context

The US dollar index has slightly strengthened during this week’s sessions. Oil has contracted, trading around $56.50 per barrel, while the 10-year US Treasury yield is approximately 4.15%.

Short-term outlook

The daily movement of silver will likely continue to serve as a guide for gold’s movements in the coming days. Investors remain divided between geopolitical concerns supporting the gold price and technical bearish elements that could trigger further corrections. The inverted double top setup on silver represents a crucial turning point: confirmation would exert significant downward pressure, while a rebound could give new momentum to bulls.

Note: The gold market operates through two distinct mechanisms for price formation: the spot market, where immediate delivery trades occur, and the futures market, where prices are set for future deliveries. Due to year-end adjustments, the most active futures contract at CME is currently the December expiry.