Wall Street entertains every possibility after gold’s wild ride, Main Street maintains its bullish bias despite new Fed head

NEW YORK (January 30) It was the best of weeks, it was the worst of weeks, as the gold market performed like a meme stock, blowing through unprecedented price levels on its way to $5,600 before stalling and crashing further and faster than at any time in recent memory – but finishing down less than 2% all told.

Spot gold kicked off the week trading at $5,021.97, and the early sessions saw very little drama, with gold trading in a $60 range up to $5,100, with a brief dip down to test support at $5,000 per ounce shortly after Monday’s North American equity close. 

The yellow metal first began to see real momentum on Tuesday afternoon, the spot gold breaking above $5,100 just before 3:00 p.m. Eastern before rocketing all the way to $5,185 by 4:30 p.m. The Asian session kicked off with spot gold trading at $5,170 per ounce, but the bull run was officially underway now, with gold rising to the very edge of $5,300 per ounce by 3:15 a.m. EST. 

The precious metal then took a bit of a breather on Wednesday morning as markets prepared for the Federal Reserve's interest rate announcement. And while the central bank delivered a hold as expected, the markets were primed to go off... And did they ever. 

By the time Fed chair Jerome Powell began his press conference at 2:30 p.m., spot gold was already trading at $5,310 per ounce... by 3:30 it had reached $5,384. After a slight dip down into the equity close, gold rocketed higher once again, blowing through $5,500 like it wasn't there to hit $5,531 per ounce by 6:30 p.m. 

Now the volatility began, as gold prices set what proved to be the new all-time high of $5,600 just before midnight before dipping back down to $5,483 by 3:30 a.m. EST Thursday morning. After a second bounce at this level just before 6:00 a.m., gold prices made one final push to reclaim the recent highs just before the North American open.

It didn't work, and the failure was as swift as it was spectacular. Spot gold fell from $5,544 per ounce at 9:15 a.m. Eastern all the way to $5,124 per ounce by 10:30 a.m. 

The bounce was nearly as violent as the fall, however, with gold trading near $5,300 once again by 11:15, before hitting $5,370 by 12:30 p.m., and ultimately topping out just shy of $5,450 per ounce at 7:00 p.m.

But despite the yellow metal's strong recovery, traders were clearly on edge, and the failure to hold $5,400 just before 8:00 p.m. saw spot gold slide quickly below $5,200 just after 9:00 p.m. 

Now the rout was on, with gold posting a series of weaker recoveries ahead of deeper corrections. By 4:30 a.m. on Friday, spot gold had slid below the $5,000 per ounce level, and after subsequently failing to hold above $5,135, gold saw a series of bounces closer and closer to $5,000. 

The definitive failure came just after 11:00 a.m. Friday morning, driving gold to the weekly low of $4,679.51 per ounce shortly after 1:00 p.m. Eastern. And after the recovery failed to reclaim $5,000 – or even come within $60 of it – gold settled into a volatile range between $4,840 and $4,900 to end one of its most extreme weeks on record.

The latest Kitco News Weekly Gold Survey showed Wall Street with a wide range of opinions and no consensus on gold’s near-term prospects, while Main Street investors maintained their bullish majority bias.

“Do I see gold moving up, down or sideways next week? Yes,” said Darin Newsom, senior market analyst at Barchart.com. “It is impossible to guess a direction at this point. The market is starting to post daily ranges of hundreds of dollars, and it isn’t alone as both silver and copper do the same.”

“Is the trend of the market still up? Yes,” Newsom continued. “Is gold overbought and vulnerable to a selloff? Yes. Could the US president do and/or say something to create more safe haven buying in gold over the weekend? Undoubtedly. What new tariffs will be threatened? What country will he say he is going to take over next. How about the US government shutdown? It’s a crap shoot at this time.”

“Up,” said Rich Checkan, president and COO of Asset Strategies International. “If today’s pullback is a result of President Trump naming his next Federal reserve Chairman, I would fully expect it to be short-lived, because the promise of lower interest rates is good for gold. And fundamentally, nothing has changed.”

“Ultimately looking for Silver back to $50-$60,” said Mark Leibovit, publisher of the VR Metals/Resource Letter. “Gold $4399.”

“Up,” said James Stanley, senior market strategist at Forex.com. “Is it still overbought? Sure, but I’m looking at the late-week selloff as a pullback at this point. That can change if sellers push next week, but for now, I’m sticking with the same trend that’s been in force for almost two years now.”

“Unchanged,” said Adrian Day, president of Adrian Day Asset Management. “Gold needs to let some steam out and may well continue at that range for a week or so. Let’s put in perspective though: this large drop only takes us back to where we were on 27th, and we are at all-time highs on a weekly basis.”

Sean Lusk, co-director of commercial hedging at Walsh Trading, was looking at the confluence of factors working against gold and silver on Friday morning.

“It's month-end, and we got a PPI print that was bullish dollar,” he said. “You had two things bullish dollar; Warsh is seen as more of a hawk. I think they were looking for Hassett, that didn't happen, and they got a reason to take some profits, so they're taking them.”

When asked whether Friday’s selloff is more about the metals’ weakness of the greenback’s strength, he said it was definitely the latter.

“Today is a U.S. dollar move, this is on Warsh coming in,” he said. “There's a shift change at the Federal Reserve. I think everyone was anticipating you were going to have a dove on the court like Steven Miran – not him, but a clone of him, if you will – and you're not getting that.”

Lusk said he doesn’t expect any movement from the Fed on rates in the near term regardless of who they chose, which made Wednesday’s steep rally ridiculous – and helped set the stage for the late-week collapse.

“The reaction after the Fed was even more goofy because they kept running up in the metals for a day and a half after,” he said. “Now you're getting slammed right back down.”

“This is sorely needed from a technical standpoint,” he added. “But this keeps getting way too overdone and out of control from a supply demand perspective, in our opinion. But again, markets can remain insolvent longer than you and I can remain solvent, and that's really what's happened here.”

But Lusk still believes the overall trend for gold remains higher. “I just think for the foreseeable future dips are going to remain bought here, unless stuff goes crazy, we really have a major correction [in equities],” he said. “The volatility has been so great, we're way overdue for this. I think everybody would agree this market needs a correction. We need a further correction here. But I think they buy these dips.”

Lusk said governments inflating away their debt remains the real driver, and that one isn’t going anywhere.

“They keep printing money,” he said. “As long as that keeps going, you're going to keep buying dips in tangible assets.”

This week, 18 analysts participated in the Kitco News Gold Survey, with Wall Street evenly divided on gold’s near-term path after a week that pointed them in every possible direction. Seven experts, or 39%, expect to see gold prices move back toward $5,000 during the week ahead, while seven others predicted further declines. The remaining four analysts, representing 22% of the total, said the yellow metal could go in either direction next week.

Meanwhile, 340 votes were cast in Kitco’s online poll, with Main Street investors sticking to their bullish projections despite gold’s wild ride and sharp drop. 249 retail traders, or 73%, looked for gold prices to rise higher next week, while another 53, or 16%, predicted the yellow metal would lose ground. The remaining 38 investors, representing 11% of the total, expected prices to trend sideways during the week ahead.

Next week features a full slate of economic data heavy on employment figures, which market participants will attempt to align with the shifting narratives on the Fed’s rate path with new leadership on the horizon, along with rate decisions from several major central banks.

Monday morning will see the release of ISM Manufacturing PMI for January, with the Reserve Bank of Australia monetary policy decision late in the evening. On Tuesday, traders will watch for JOLTS job openings. Wednesday morning will feature ADP employment data along with the ISM Services PMI for January.

On Thursday, central banks take center stage, with the Bank of England’s monetary policy announcement in the early morning, followed by the European Central Bank rate announcement not long afterward, along with weekly jobless claims figures from the United States.

The week ends with the Friday morning release of the U.S. Nonfarm Payrolls report for December, followed by the University of Michigan’s Preliminary Consumer Sentiment survey.

“After its parabolic rise, gold and silver tumbled ahead of the weekend,” said Marc Chandler, managing director at Bannockburn Global Forex. “The proximate trigger was the dollar’s rally and higher rates as the market priced in a hawk at the Fed in the form of Kevin Warsh to succeed Powell.  However, that was the knee jerk reaction, and the market is well aware that to get the nomination, Warsh had to appeal to President Trump, who wants lower rates.”

“The Fed funds futures are pricing in two cuts this year,” Chandler said. “Gold’s setback saw it return to the middle of the January range—found near $4935.  A break could signal a move toward the next retracement (~$4780).  It may take a move above $5200 to boost confidence that a low is in place.”

Adam Button, head of currency strategy at Forexlive.com, told Kitco News that he thinks weeks like this one – and days like Friday – will become far more common as the gold market leaves the low-volatility rally behind.

“Just the scale of the volatility,” he marveled. “It’s been such an incredible ride, and really a smooth ride, to the upside. The volatility late this week reminded everyone that you can lose money in precious metals too.”

That said, Button believes the key structural supports beneath gold’s rally remain in place.

“Is the dollar debasement trade going to change?” he said. “You had Bessent try to walk back Trump's weak dollar stuff, but Trump said it. Everybody knows that only Trump matters. So at the end of the day, you have a president who wants a weaker dollar, and who's breaking the world order. Those are your pillars of gold strength and price action.”

“I can't see it going below $4,000,” he added. “I just think if you ever had a three-handle on gold, there'd be so much buying.”

Button warned, however, that precious metals investors should expect extreme price swings going forward – and not just in silver, but in gold, too.

“I think a higher-volatility paradigm is coming now,” he said. “Gold bulls have been spoiled by this low volatility melt-up. But the long-term history of any bull market is something goes up the escalator, and periodically corrects down the elevator. Gold hasn't experienced that, probably because central banks have been buying dips.”

“I think that the low turmoil rallies are done,” Button said. “The path is still higher, but it's a lot more volatile.”

Alex Kuptsikevich, senior market analyst at FxPro, told Kitco News that he sees gold prices trending lower still next week.

“This week, we saw the long-awaited upward slide, which finally knocked out the short sellers and triggered a powerful sell-off, which often follows moments of final destruction for those who stood against the market,” he said. “Interestingly, Thursday and Friday's dramatic events, with a cumulative price decline of 10% from the peak, have kept the price close to the week's opening level. However, we are confident that the rally has already peaked. This is easy to see in the synchronous sell-off across all metals that followed the spectacular new highs in both nominal and relative terms across many metrics.”

“As for the potential for a decline in gold, the first target appears to be the $4,700 area, which is a typical correction area of 61.8% of the last rally since August,” Kuptsikevich added. “Given the sharp decline and apparent overheating earlier, the market could reach this level as early as next week. However, in the longer term, up to a year, we see the potential for a more profound decline, between $3,600 and $4,000, which would correct all the growth since 2022.”

Michael Moor, founder of Moor Analytics, believes gold prices will slide lower next week.

“In a Higher time frame: I cautioned on 8/16/18 the break above $1,183.0 warned of renewed strength,” he said. “We have seen $4,443.1. In a Medium time frame: The break above 31482 brought in $1,959.7 of strength. The trade above 32214 brought in $1,886.5 of strength. The trade above 32236 brought in $1,766.8 of strength. The trade above 32392 projected this up $115 (+)—we attained $1,868.7. The trade above 33411 brought in $1,766.8 of strength. The trade above 33850 brought in $1,722.9 of strength. The trade above 34186 brought in $1,689.3 of strength. The break above 35640 brought in $1,543.9 of strength. The trade above 36658 brought in $1,442.1 of strength. The trade above 37143 brought in $1,393.6 of strength. The break above 37725 brought in $1,335.4 of strength. The trade above 38828 brought in $1,225.1 of strength. These are ON HOLD.”

“On a lower timeframe basis:  The trade above 39732 brought in $1,653.6 of strength,” Moor said. “The trade above 40701 brought in $1,556.7. The trade above 41738 brought in $1,453.0. On 11/5 we also left a medium bullish reversal. The trade above 42758 brought in $1,351.0. The break above 45675 brought in $1,059.3 of strength. These are ON HOLD. The trade above 52245(+11 tics per/hour) brought in $402.3 of strength, but I will no longer mention this as we are trading below.”

“I warned we were likely in the last stretch up from 39013 and 32843, with possible exhaustion at 56192—we held this with a 56268 high and rolled over $1,564.1,” Moor added. “We broke below a formation at 52138 (+26 tics per/hour) that projects this down $250 minimum, $488 (+) maximum. The trade below 51616 (+21 per/hour) also projects this down $115 minimum, $610 (+) maximum. If we break back above decently, look for decent strength.”

And Kitco senior analyst Jim Wyckoff noted that gold and silver prices were falling on the Warsh-for-Fed-chair news. “Profit taking and weak long liquidation from the shorter-term futures traders are featured in gold and silver today.”

“Technically, price action late this week in April gold futures has formed a bearish ‘key reversal’ down on the daily bar chart, which is one chart clue that a market top is in place,” he said. “Bulls’ next upside price objective is to produce a close above solid resistance at the record high of $5,626.80. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $4,750.00. First resistance is seen at $5,200.00 and then at $5,250.00. First support is seen at the overnight low of $4,962.70 and then at $4,900.00.”

At the time of writing, spot gold last traded at $4,860.66 per ounce for a loss of 1.84% on the week – and 9.49% on the day.

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