Insights 
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Markets began the week in disarray after gold experienced a dramatic technical reset, forcing traders to abandon the previously dominant parabolic thesis. A sharp liquidation wiped out weeks of gains in a single session, marking a decisive shift in sentiment.
What had looked like a relentless march towards the $6,000 level unravelled abruptly on Friday, now widely labelled a “Black Friday” moment for precious metals. The catalyst was the unexpected nomination of Kevin Warsh as the next Chair of the Federal Reserve. Positioning had been heavily tilted towards a weaker US dollar and a more accommodative central bank stance.
Instead, the prospect of a more hawkish Fed prompted a rapid rebound in the dollar from multi-year lows. That move triggered widespread margin calls, sending gold sharply lower from its record peak of $5,998 to below the $5,000 threshold.
Fed Repricing And The Deflation Of The Gold Trade
The policy shift reverberated far beyond FX markets, effectively puncturing the momentum-driven rally in hard assets. Throughout much of January, gold had been treated as the ultimate hedge against perceived Fed debasement and escalating trade frictions.
However, Warsh is widely viewed as a strong proponent of dollar stability and a tighter balance sheet. As a result, the easy-money backdrop that had fuelled gold’s 29% surge in January has abruptly faded.
The decline has been amplified by technical unwinds and speculative fatigue. Traders who had confidently positioned for a sustained breakout are now reassessing the opportunity cost of holding a non-yielding asset, particularly with US 10-year Treasury yields holding firm around 4.24%.
Market Movements Of The Week
Gold (XAUUSD)
– XAUUSD retraces at key support level 4550.
– If bearish momentum extends, it could slide towards the 4400 level.
– Risk-off sentiment could push prices lower.
Silver (XAGUSD)
– XAGUSD retraces at key support level 74.
– Silver could start consolidating between 86.8 resistance level and 74 support level.
– Upcoming NFP data is crucial for Silver’s movements.
US Dollar Index (USDX)
– USDX has found support at the 95.35 level.
– USDX is currently testing an important resistance level priced at 97.
– If USDX manages to break past current resistance level, it could seek higher prices.
Bitcoin (BTC)
– Bitcoin extends its bearish momentum towards the $75,000 support level.
– If current support level breaks, it is likely to seek the $70,000 support level.
Ethereum (ETH)
– Ethereum is forming lower lows and lower highs, indicating a bearish trend.
– Ethereum is testing the current support level, priced at 2200.
– If the current support level doesn’t hold, it could slide lower to 2000.
Key Events This Week
2 February
1. US ISM Manufacturing PMI, Forecast: 48.5, Previous: 47.9
Manufacturing contraction continues; tariff uncertainty weighs.
4 February
1. US ADP Non-Farm Employment Change, Forecast: 48K, Previous: 41K
Private hiring slowdown could pause dollar rally.
Summary
Gold’s longer-term outlook remains underpinned by expectations that the Federal Reserve will deliver additional interest rate cuts in the months ahead. The decision by US President Donald Trump to appoint former Fed official Kevin Warsh as Jerome Powell’s successor in May has reinforced this view.
That said, a shift in leadership does not automatically translate into aggressive easing. Even so, the change at the top may gradually steer market expectations towards lower rates, a dynamic that could weigh on the US dollar while preserving a supportive medium-term environment for gold.
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