Gold price drops 2% from January peak due to China DeepSeek AI sell-off
Gold prices plummeted, reaching a four-day low at $2,730
Gold enthusiasts were on the edge of their seats last week as the precious metal came within a hair's breadth 0.1% of setting a new all-time high above $2,790, fueled by a consistent uptrend throughout January 2025. However, this week has delivered a stark contrast, with gold prices taking a significant hit.
On Monday, gold prices plummeted, reaching a four-day low at $2,730 which might have been exacerbated by a general market sell-off, possibly triggered by interest in a Chinese AI company. This decline was marked by a bearish engulfing pattern on the charts, a classic sign of potential further downturn. The Relative Strength Index (RSI) also transitioned from an overbought condition to bearish territory, suggesting that the bullish momentum that had carried gold through early January might be waning.
Gold price dynamics (October 2024-January 2025). Source: TradingView.
Despite the sell-off, there's a silver lining for those still holding gold. The plunge in U.S. Treasury bond yields and concerns over Trump's trade policies somewhat cushioned the fall for gold, keeping it as a preferred safe-haven asset. In addition, the price level of $2,725, which had previously acted as resistance during November and December of last year, now serves as a near-term support which could provide a foundation for a price rebound if buying interest returns.
Gold price recovery after 4-day low sees $2,725 key support
As of Tuesday, January 28th, gold has been trading sideways with minimal volatility, hovering around $2,740 from the Asian session into the European session. The market watches with bated breath, curious about where the price will head next. Traders are currently adopting a wait-and-see approach, especially with the Federal Open Market Committee (FOMC) meeting on the horizon.
While gold's price outlook currently appears clouded by recent bearish signals, key support levels and external economic factors suggest that the precious metal might not be down for the count just yet. The outcome of the FOMC meeting could significantly influence several market directions, including gold during the North American session and traders should keep an eye on it.
Weak Treasury yields supported gold’s 6% rise in January, pushing prices close to the all-time high. Softer demand in the Asian session caused a 0.8% decline, trimming year-to-date gains to 4.9%.
