• Gold price analysis suggests the probability of further downside as the stronger dollar weighs on the precious metal.
• The new Fed Chair nomination has triggered a wave of deeper retracement in gold after a strong rally.
• Gold’s structural support remains intact as central banks still buy, while US-Iran tension also maintains a safe-haven demand.

Gold prices are now in a sharp correction phase after a strong rally earlier in January. The recent price drop is due to a combination of macroeconomic developments, forced deleveraging, and regulatory responses in key markets. The initial cause was a change in US monetary expectations, but the depth of the move shows how weak positioning had become.

The choice of Kevin Warsh as the next Fed Chair has calmed fears of aggressive easing and led investors to believe that financial conditions will get tighter. This, along with higher US producer inflation, has helped the US dollar and real yields, weighing on the non-yielding metal in the short term.

The drop was exacerbated by systematic selling, as momentum indicators had remained deeply overbought before the reversal, leaving the market vulnerable to quick liquidation once key levels were breached.

Developments in China show the extent of volatility. ICBC, Bank of China, and China Construction Bank, among other major Chinese banks, warned precious metals investors in public that the markets were “technically fragile” and urged caution. The Shanghai Gold Exchange changed its margin requirements and price limits in response, making it harder to speculate aggressively. These actions show that the government is concerned that recent price changes were driven more by leverage and sentiment than by steady end-user demand.

Stress has also shown up among retail users. In Kyrgyzstan, residents have reportedly rushed to sell certified gold bars to the state-owned Kyrgyzaltyn company after the global slump. This shows how quickly behavior can change from hoarding to capital preservation in smaller markets after a big drop.

The structural pillars that support gold remain intact, even after the correction. Central banks are buying more to diversify their reserves. Meanwhile, on the geopolitical front, tensions between the US and Iran remain high, keeping safe-haven demand alive even though rhetoric has calmed down in the short term.

This correction doesn’t look like a trend reversal. It looks more like a necessary reset after a huge, emotion-driven rise. Gold could stabilize and build up, but for it to go back up quickly, there will probably need to be more macro stress or a clear pivot in global monetary conditions.
 

Gold Price Technical Analysis: More Losses Below 200-MA
 

(Click on image to enlarge)

Gold 4-hour chart
 

The 4-hour chart for gold shows a dismal scenario as the price finally moves below the 200-period MA near $4,600 for the first time since Nov 2025. This indicates a lasting downtrend with potential for further losses. However, the RSI has hit the oversold zone, suggesting a potential consolidation or pullback before further downside.

The precious metal could test the 100-period MA near $4,835 ahead of the $5,000 psychological mark and then the 20-period MA at $5,250. On the flip side, the gold could break today’s lows of $4,400, which could lead to filling the gap at $4,330. Further downside could test the $4,000 psychological mark.

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