Silver, gold price retreat from key levels; experts warn of downside risks

Silver prices continued to drop on Friday as the metal headed for its second weekly decline on a stronger dollar and profit-taking. 

The recent renewed weakness highlighted the extent of the technical damage caused by last Friday’s historic sell-off. 

This development calls into question whether the previously most powerful bull run in metals history can be sustained.

Precious metals plunge deepens

“As highlighted in our previous analysis, the inability of silver to regain the $90/oz threshold and gold’s failure to recapture the $5,000/oz level represented a pivotal technical juncture that suggested additional downside risk remained,” Kitco.com said in a report. 

The bearish outlook was fully confirmed on Friday as both metals came under significant selling pressure, according to the report. 

The price levels that recently provided strong psychological and technical support during the rally have now become challenging resistance barriers.

In a significant and abrupt retreat, gold experienced one of its sharpest single-day declines in recent months, plummeting by $187, or 3.78%, to close at $4,776.40 per ounce. 

This steep drop caused the yellow metal to fall beneath crucial support levels and key moving averages that technical analysts had been closely watching.

At the time of writing, the silver contract on COMEX was at $72.100 per ounce, down almost 6% from the previous close.

On the other hand, gold prices on COMEX struggled to move above $4,900 per ounce as the metal fell 1.1% to $4,835.90 an ounce. 

Silver experienced a volatile session on Friday, initially falling by 10% to below the $65-level—a more than one and half month low—before rallying to post a 3% gain.

Silver prices experienced a significant downturn, falling almost 16% this week.

This follows last week’s performance, which saw its largest weekly drop since 2011, shedding 18%.

Market turbulence and dollar strength

The selloff on Wall Street intensified, leading global equities to extend losses for a third straight session.

This market turbulence also gripped precious metals and cryptocurrencies, resulting in extreme volatility.

The US dollar is set to record its best weekly performance since November, having stabilised near a two-week peak. 

The effect of a stronger dollar is that assets priced in the currency become more costly for those holding other currencies.

Meanwhile, despite a swift rebound from the mid-$4,600s, or a four-day low seen during the Asian session on Friday, the price of gold was not exhibiting sustained upward momentum.

“A turnaround in the risk sentiment – as depicted by a sea of red across the global equity markets – drives flow toward traditional safe-haven assets and acts as a tailwind for the commodity,” Haresh Menghani, editor at FXStreet said in a report. 

Weak US data fuels rate cut hopes

On Thursday, US President Donald Trump stated he would have rejected Kevin Warsh as his Federal Reserve Chair nominee had Warsh favored raising interest rates.

Trump further expressed confidence that the US central bank would lower rates.

Traders are currently pricing in a scenario where the US Federal Reserve delivers a minimum of two 25-basis-point rate cuts in 2026, a probability tracked by the CME Group’s FedWatch Tool.

On the economic front, new applications for unemployment insurance increased to 231,000 for the week ending January 31, according to the US Department of Labor. 

This figure represents a rise from the 209,000 recorded the previous week and exceeded the estimated increase to 212,000.

Additionally, private-sector job growth saw a significant slowdown in January, according to the Automatic Data Processing (ADP) Research Institute. 

Employers added only 22,000 new jobs, falling short of the estimated 48,000 increase and marking a sharp decline from the downwardly revised 37,000 figure reported for the previous month.

Weakening economic data from the US augurs well for precious metals such as gold, as this may lead to the Fed cutting interest rates.

Lower rates benefit gold and silver as they are non-yielding assets. 

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