When Precious Metals Retreat: An Old Trading Adage Gets Put to the Test

Early Thursday trading saw gold and silver undergo a notable pullback, with white metal experiencing particularly steep losses. The decline stems from a confluence of factors: profit-taking by short-term futures speculators and liquidation of weakened long positions. Yet what truly unsettled bullish participants was the technical breakdown forming in silver’s chart—a bearish signal that rippled across the entire precious metals complex. An old trading adage reminds us that bull markets require continuous fresh catalysts to remain viable, and currently, both gold and silver appear starved of such supportive narratives.

The Numbers Tell the Story

February gold futures traded at $4,431.7 per ounce, registering a loss of $30.8. March silver futures showed sharper pain, declining $3.783 to settle at $73.83 per ounce. Beyond daily price action, traders now brace for a significant structural event: the annual rebalancing of commodity benchmark indices. This mechanical process is expected to trigger the sale of tens of billions in futures contracts over coming sessions.

Citigroup’s assessment points to approximately $6.8 billion in silver futures reaching the market as index constituents reweight positions. Gold futures face comparable outflows. The underlying reason, as Bloomberg notes, stems from the expanded allocation to precious metals within major commodity indices.

The Broader Economic Context

A peculiar disconnect emerges between market sentiment and labor market realities. U.S. employers announced merely 35,553 planned layoffs in December—the lowest since July 2024 and a dramatic 50% drop from November’s 71,321. Year-over-year, December 2024 saw layoffs decline by 8% relative to December 2023. This ostensibly dovish labor data contradicts the precious metals’ directional weakness, suggesting markets price in other concerns.

However, the 2025 annual tally paints a darker picture. U.S. employers announced 1,206,374 layoffs throughout the year—a staggering 58% surge compared to 2024 and the highest total since 2020. The government sector led with 308,167 separations; the technology industry dominated private-sector cuts with 154,445, reflecting accelerated AI advancement and residual over-hiring from prior years.

Policy Uncertainty Weighs

The Trump administration’s tariff framework faces imminent Supreme Court scrutiny. A ruling could arrive as early as Friday, determining whether the administration’s invocation of the 1977 International Emergency Economic Powers Act—previously untapped—provides legal cover for sweeping “reciprocal” duties on trading partners and targeted tariffs on China, Canada, and Mexico. Lower courts have already challenged these measures as exceeding executive authority.

Should the Supreme Court invalidate the tariff regime, hundreds of billions in potential refund liabilities loom. Yet contingencies exist: Congress has delegated tariff authority to the executive through multiple statutory pathways, offering Trump at least five alternatives—though each carries procedural restrictions limiting the administration’s immediate flexibility.

Simultaneously, the defense spending conversation reshapes sentiment. Trump proposed a $500 billion annual increase in military expenditure, pushing the total defense budget toward $1.5 trillion. An accompanying executive order mandates contractors cease stock buybacks and dividend distributions while capping executive pay at $5 million annually until capital spending and R&D expand. Major contractors—Raytheon Technologies, Northrop Grumman, Lockheed Martin, General Dynamics—saw equity valuations compress.

Energy Market Disruption

Perhaps the most dramatic policy shift involves Venezuelan crude. The Trump administration announced plans to assume control of up to 50 million barrels—an epochal recalibration of global energy supply. Energy Secretary Chris Wright elaborated on details Wednesday, confirming the federal government’s direct market entry. This reversal of years-long sanctions could reactivate Venezuelan oil flows to U.S. refineries, representing one of the most consequential shifts in energy markets in recent memory.

Canadian crude prices have already plunged; benchmark futures face downward pressure. Venezuela, holder of the world’s largest proven reserves, has suffered output collapse below 1 million barrels daily due to decades of underinvestment, sanctions, and isolation. Trump signaled intent to rehabilitate the nation’s petroleum sector profitably over coming years. Yet without crystallized legal and political frameworks, major drilling operators exhibit measured caution.

Technical Signposts

For February gold futures, bulls target a break above the all-time high of $4,584.00 per ounce. Bears aim to penetrate the key support of $4,284.30. Immediate resistance sits at the overnight peak of $4,475.20, with $4,500.00 as secondary resistance; support clusters at $4,400.00 and this week’s low of $4,354.60.

March silver futures display concerning chart structure—a potential double-top reversal pattern threatens bulls’ conviction. Upside targets remain the historical zenith of $82.67 per ounce; downside vulnerability emerges below the prior week’s low of $69.225. First resistance resides at $75.00-$76.00; support congregates at $74.00-$72.50.

The divergence between fundamental resilience (labor stabilization) and technical fragility (bearish patterns) underscores the market’s struggle to identify reliable direction amid geopolitical and policy turbulence.