- Analysis of gold prices indicates the possibility of further decline as the rise in the dollar affects the precious metal.
- The nomination of a new Fed Chairman sparked a deeper decline in gold after a strong rally.
- Structural support for gold remains in place as central banks continue to buy, while US-Iran tensions also maintain safe haven demand.
Gold prices are now going through a sharp correction after rising strongly earlier in January. The recent decline in prices is due to a combination of macroeconomic developments, forced deleveraging, and regulatory responses in key markets. The initial trigger was a change in US monetary expectations, but the depth of the move shows how weak currency positions have become.
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The selection of Kevin Warsh as the new Fed head has allayed fears of aggressive easing and led investors to believe that financial conditions will become tighter. This, coupled with higher US producer inflation, has helped the US dollar and real yields, weighing on the non-yielding metal in the short term.
The decline was exacerbated by systematic selling, as momentum indicators remained deeply overbought before reversing, leaving the market vulnerable to a quick liquidation once key levels are breached.
Developments in China show the extent of the volatility. The Industrial and Commercial Bank of China (ICBC), the Bank of China and the China Construction Bank, among other major Chinese banks, have publicly warned precious metals investors that markets are “technically fragile” and urged caution. The Shanghai Gold Exchange changed margin requirements and price limits in response, making aggressive speculation more difficult. These actions show that the government is concerned that recent price changes have been driven more by leverage and sentiment than by firm demand by the end user.
Tension has also emerged among retail users. In Kyrgyzstan, residents reportedly rushed to sell certified gold bullion to the state-owned Kyrgyz company after the global recession. This shows how quickly behavior can change from hoarding to capital preservation in smaller markets after a major decline.
The structural pillars that support gold remain intact even after a correction. Central banks are buying more to diversify their reserves. Meanwhile, on the geopolitical front, US-Iran tensions remain high, keeping safe haven demand alive despite calming rhetoric in the short term.
This correction does not appear to be a trend reversal. It feels like a necessary reset after a huge, emotion-driven rally. It is possible that gold will stabilize and accumulate, but for it to rebound quickly, there will likely be further macro pressures or a clear pivot in global monetary conditions.
Technical analysis of gold price: more losses below the 200-MA
The 4-hour chart for gold shows a dismal scenario as the price finally moves below the 200 period moving average near $4,600 for the first time since November 2025. This indicates a permanent downtrend with the potential for further losses. However, the RSI has reached the oversold territory, indicating a possible consolidation or pullback before further downside.
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The precious metal could test the 100-period EMA near $4,835 before the psychological $5,000 level and then the 20-period EMA at $5,250. On the other hand, gold may break today’s lows at $4,400, which could fill the gap at $4,330. Further decline may test the psychological level at $4,000.
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