There's always that certain sense of danger when it comes to consensus trades. And this one here to start the new year is no different. Everyone's talking about commodities as we get into 2026 trading with plenty of focus and attention on gold and silver, especially after the surging rally in December.
And after a hot start to the week, both precious metals are sliding back lower now. The former is down nearly 2% from the highs while the latter is down over 8% from the highs this week. Volatility? Yes, please.
The main event this week is the US labour market report tomorrow. That being said, it doesn't mean that it is the only game in town though. There's also the Supreme Court ruling on Trump's tariffs as well. So, just keep that in mind.
But before we get to that, we're already seeing a testing moment amid the price drop today.
Gold is falling back down to test the confluence of its 100 (red line) and 200-hour (blue line) moving averages once again. The key support region is seen at $4,422-28 currently, and a break below that will see the near-term bias switch back to being more bearish. Hold above and buyers will stay in with a shout in trying to build for another leg higher after the events tomorrow; if they play out accordingly that is.
And it's the same thing we're seeing in the silver chart too:
The precious metal is seeing price drop by nearly 3% so far today, dragging it back towards a test of its 200-hour moving average (blue line) at $75.59. Hold above that and buyers will still retain some semblance of near-term control. However, break below that and the near-term bias switches to being more bearish again.
As mentioned above, the danger when it comes to consensus trades is always the neck breaking pace in which pullbacks and/or corrections can happen. The end direction tends to side with the consensus come what may but you can't underestimate or discount the potential and the strength of any retracements.
With there being such a heavy consensus for gold and silver to keep rising, that despite the surging pace of gains since August last year, it would be unwise to ignore the early warning signals from the charts. And that especially if there is a sequence of events that align with conditions for a pullback. So, this may just be an early test but it is one well worth being mindful about.
