Analysis | Gold, silver surge after record drop flashes technical signal

Gold bugs and silver bulls had a lot to cheer about this year ... until last week. The surprise decision by President Donald Trump to nominate inflation hawk Kevin Warsh as the next Federal Reserve chairman sparked a rally in the U.S. dollar, putting the kibosh on the gold and silver rally. 

The drop was so bad that silver’s decline was the worst since 1980, when the Hunt brothers’ attempt to corner the silver market was derailed by a ratcheting of margin requirements higher (sound familiar?), Blondie’s “Call Me” was topping the Billboard charts, and I was running for president of my fourth-grade class.

Now, the million-dollar question on gold and silver investors’ minds is whether this seismic sell-off is a signal of something dire and lasting, or a temporary speed bump on the way to greater gains.

Wall Street is lining up to refresh its outlook on precious metals, and analysts knee-deep in technical analysis are poring over price charts for clues. 

Ed Ponsi, a veteran trader and managing director of Barchetta Capital Management, an NFA-registered commodity trading advisory, is among the latest to weigh in on what could happen to metals next.

Photo by Zlaťáky.cz on Unsplash

Gold, silver hit bounce-back territory

The market rarely moves in a straight line up or down for long. Those plummets are fierce, fast, and frightening, but they often flame out quickly, especially when declines push prices to technical support levels like the 50-day or 200-day moving averages.

Those levels are used as lines in the sand by technicians interested in buying or selling into strength or weakness. The January 30 precious metals massacre continued with further declines on the next trading day, Feb 2, bringing both gold and silver to their 50-DMA levels.

Perhaps, unsurprisingly, that was enough, at least for now, to whet the appetite of those who felt they’d missed out on the big run-up last year and were left on the sidelines looking for a do-over.

“Plenty of investors missed the recent rally in gold and silver,” noted Ponsi in a TheStreet Pro post. “On Monday, spot gold finally found support when it reached its 50-day moving average (blue), located near $4,480. Gold went slightly below that level, bottoming just above $4,400, before bouncing back to $4,800.”

The silver situation was similar, as Ponsi notes that spot market prices tested the 50-dma twice. 

“On both Friday and Monday, buyers stepped in when the price reached that key indicator, which is currently located near $75,” noted Ponsi.

The 50-dma isn’t nearly as strong a support or resistance line as the 200-dma, given the larger number of data points. Still, that didn’t stop buyers from loading up on buy orders. The push higher could help establish another floor at the 50-dma that would similarly support the metals if they rollover again, as some nervous holders will likely use strength to unwind at some point.

“Evidence suggests that one or more institutions bought gold and silver when their prices reached their respective 50-day MAs. That could happen again, as institutions aren’t always able to get the bulk of their orders filled before the price moves away,” said Ponsi.

Gold, silver backdrop remains Fed, dollar

The catalyst for the big drop in metals was Warsh’s nomination. Historically, Warsh has struck a hawkish tone, believing the Fed is too quick to use interest rates to juice the economy and was mistaken to embrace buying Treasuries and mortgage-backed securities, or MBS, to further influence rates (quantitative easing or tightening, respectively).

Yet focusing too much on Warsh’s past comments might not be the right decision, given his largely dovish recent history. Warsh was on the short list to replace Chairman Powell during Trump’s first term. He wasn’t going to miss the opportunity this time around, so he’s largely stayed on board with Trump’s goal of reducing rates over the past year.

The idea that he’d be more friendly at the Fed than some fear was backed by hedge fund managers last week. Billionaire legends Ray Dalio and Stanley Druckenmiller, for whom Warsh worked as a partner in his family office, struck a positive tone, arguing that labeling Warsh a hawk was mistaken, and opening the door to the idea that rate cuts are still on the table in 2026.

If so, that would solidify the argument that gold bugs have embraced for a while: rate cuts negative impact on the U.S. Dollar would lend support to gold prices, given gold is priced in USD, and a lower dollar makes it more attractive to foreign banks, like central banks eager to diversify holdings away from Treasuries, given the U.S. mountain of debt.

That’s certainly become the consensus among Wall Street analysts, most of whom have lined up to say gold will move higher by year’s end.

UBS thinks gold hits $6,200 mid-year, and finishes 2026 at $5,900, reflecting another $1,000 per ounce gain from current levels. 

With the shiny metal trading around $4,865 an ounce, the bank just bumped its price target to $6,200 for March, June, and September 2026, up from $5,000 previously. 

Meanwhile, Goldman Sachs rates gold an overweight with a $5,400 per ounce target in 12 months.

TheStreet

This story was originally published February 3, 2026 at 11:55 AM.