Gold shows volatility as the Chinese People's Bank strengthens gold reserves

Global Purchases Support Gold Price Despite Bearish Technical Signals

The Chinese People’s Bank has continued its campaign of accumulating precious metals, increasing gold reserves for the fourteenth consecutive month. In the previous month, the institution acquired 30,000 ounces of gold, bringing the total purchases since November 2024 to approximately 1.35 million ounces (about 42 tons). These interventions reflect persistent official demand even in a context of all-time high valuations, highlighting how central institutions remain convinced of the store of value of this precious metal.

Price Movement and Profit-Taking During the U.S. Session

On Wednesday, January 7, during the American afternoon trading session, both gold and silver experienced declines. The February gold futures contract traded at $4,467.2 per ounce, down $28.9 from previous levels. Silver faced even greater pressure, with the March futures quoted at $78.22 per ounce, representing a decline of $2.819. These movements are rooted in short-term traders taking profits, who preferred to close long positions amid significant technical resistance near historic highs.

Technical Setup of Silver Raises Concerns for Buyers

The daily chart analysis of the March silver futures contract on the New York Mercantile Exchange reveals a potential bearish double top pattern, with today’s movement further increasing this probability. Confirmation of this setup will depend on price behavior for the rest of the week and, crucially, on the ability to maintain a close below the level of $69.255 per ounce, corresponding to the lower of the two theoretical peaks. If this critical threshold is broken downward, a cascade of automatic sell orders placed by traders could be triggered.

Developments in the Macroeconomic Context and Supporting Factors

Despite recent volatility, the gold price has maintained an annual performance superior to the last forty-five years, marking the best trend since 1979. This result is supported by the convergence of multiple factors: coordinated central bank purchases, persistent geopolitical tensions, and capital flows into alternative value preservation instruments, driven by dissatisfaction with sovereign bonds and money markets. The US dollar index showed slight strengthening, while oil prices fell to around $56.50 per barrel; 10-year US Treasuries are quoted at 4.15%.

Critical Levels for Technical Outlook of Gold

From a technical analysis perspective, February gold futures present a primary bullish target represented by a stable close above the contract high of $4,584.00 per ounce. Conversely, bearish traders aim to undermine the strong technical support located at $4,200.00 per ounce. Immediate resistance levels are at the previous daily high of $4,512.40, followed by $4,550.00, while nearby supports include today’s low of $4,432.90 and subsequently $4,400.00.

Resistance and Support Levels for Silver

Regarding the March silver contract, the upside target remains a close above the significant all-time high of $82.67 per ounce. For shorts, the bearish target focuses on a close below last week’s support at $69.225 per ounce. Nearby resistances are at $79.00 and $80.00 per ounce, while subsequent supports are at $75.70 and $75.00 per ounce respectively. Silver’s movement is likely to continue influencing the direction of gold.

Methodological Note on Market Mechanisms

Gold prices are determined through two main channels: the spot market, where physical gold is traded with immediate settlement, and the futures market, where quotations are set for future deliveries. Considering the current portfolio repositioning cycle at the end of the fiscal year, the most liquid futures contract currently remains the December expiry on the Chicago Mercantile Exchange.