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    Bob Savage from BNY expects a strong correction in gold prices because of the dollar’s strength from the Fed chair nomination.

    by VT Markets
    /
    Jan 30, 2026
    Gold prices recently fell significantly after Kevin Warsh was nominated as the next Federal Reserve chair, which strengthened the U.S. Dollar. Gold’s price dropped by 5.9%, and both Silver and Platinum fell by more than 10%. However, in January, Gold rose by 17%, and Silver surged by 43%. Analysts think the news about Warsh triggered a long-anticipated correction, as the market was historically overbought before this pullback.

    Familiar Pattern Develops in Gold

    As January 2026 draws to a close, we notice a similar pattern in gold. Last January, Gold had a 17% rally that led to overbought conditions, ripe for a sharp reversal. The announcement of a tough Fed chair nominee caused that significant correction. This month, Gold has already increased by about 8%, and the 14-day Relative Strength Index is above 70, indicating the market is again stretched. This rally has happened while the U.S. Dollar Index (DXY) weakened to about 101.50 recently. These conditions make gold sensitive to surprise news. For derivative traders, this is a reminder to be cautious and consider hedging long positions or betting on a pullback. Buying out-of-the-money put options could protect against a sudden drop, like we experienced last year. The Federal Reserve meeting in mid-February could quickly change market sentiment.

    Market Signals and Trading Strategies

    The cost of gold options, shown by implied volatility, is rising, indicating that the market is preparing for bigger price swings. This is a good time to reassess strike prices and expiration dates on current positions. Increased buying of call options shows that while many traders are optimistic, the market could become overcrowded on one side of the trade. Create your live VT Markets account and start trading now.

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