As we get into the session, everyone is keeping a watchful eye on precious metals at the moment. The parabolic surge higher was what captivated markets all through this month. However, is it finally running out of steam now as we are in the final stretch of January trading? It would be quite a timely one as the seasonal tailwind also draws to a close, especially for silver.
Both gold and silver are being shoved lower today after a quick bout of profit-taking yesterday. The overnight drop was somewhat held by key near-term support but that is now starting to crack as we get into European trading.
The near-term charts for both gold and silver are painting a similar picture. That being the latest drop now takes out the 100-hour moving average (red line), which shifts the near-term bias from being more bullish to more neutral instead.
There’s still some work to fully break the momentum, which likely will result in a material pullback for both precious metals. The 200-hour moving average (blue line) will be an important line in the sand in that regard.
However, do also keep a look out for round floor figures such as $5,100 and $5,000 for gold and then also $106 and $100 for silver respectively.
A firmer break on those will likely run stops and trigger more profit-taking from certain quarters of the market. As a reminder, profit-taking begets profit-taking and it’s a cascading effect. So when it starts to run, it can really run. And that means any correction/pullback/retracement on this parabolic move can be potentially be a deep and sharp one.
Circling back to the seasonal patterns, February is a bit of a mixed month for gold historically. It has been good sometimes in the past but in recent years, not so much. That especially in following up any gains from January with the exception of 2025.
Meanwhile, February as a whole is not too bad a month for silver in the past two decades. However, that seasonal trend has sort of branched off to a different path in recent times. In the past eight years, silver has posted a drop in seven February months.
So, there’s some argument there from a seasonal perspective that perhaps the parabolic surge higher may very well be running out of steam. That especially since January is usually the best month for both gold and silver.
This article was written by Justin Low at investinglive.com.