Spot Gold Breaks Through $4500/oz in Early Trading, But Pullback Reflects Risk-Off Sentiment Cooling

Spot gold broke through $4500/oz during early trading today, marking a new high in over a week, but subsequently pulled back by more than $20/oz to trade at $4472/oz. Silver similarly opened strong but closed weak, retreating from $82/oz to below $81/oz. Behind this seemingly dramatic price action lies the phased cooling of risk-off sentiment and continued support from medium to long-term bullish fundamentals.

Risk-Off Sentiment Cooling Behind Short-Term Pullback

Looking at the timeline, this gold rally originated from U.S. military action against Venezuela and Maduro’s arrest on January 3rd. Following the news, market risk-off sentiment quickly intensified, with gold gapping higher on January 5th to break through $4420/oz, while silver surged nearly 5%. This rapid response typified the short-term propulsive force of geopolitical risk on precious metals.

However, today’s pullback suggests this risk-off enthusiasm is gradually dissipating. After digesting the initial shock, the market is reassessing the actual economic impact of the risk. Although the Venezuela situation has escalated, its direct impact on the global economy remains relatively limited, which constrains the sustainability of risk-off bid. The short-term pullback from highs represents a rational repricing process.

Technical Significance of $4500 Cannot be Overlooked

Despite the pullback, gold’s breakthrough of the $4500 level retains important significance. According to relevant analysis, gold previously tested the $4300 area multiple times, forming a textbook head-and-shoulders bottom formation. The $4500 breakthrough means the neckline resistance of this formation has been effectively penetrated—a clear bullish signal on the technical side.

The establishment of key support levels is equally important. Analysis suggests $4380 nearby serves as an entry point, while a break below $4365 would destroy formation support. The current $4472 price remains above these critical support levels, indicating bulls still maintain control.

Medium-Term Uptrend Logic Remains Intact

Short-term volatility doesn’t alter the medium-term trend. The factors supporting continued gold appreciation remain solid:

• Explicit Fed Rate-Cut Expectations: According to latest data, CME FedWatch shows March cumulative rate cuts of 25 basis points now carry a 47.1% probability, while Fed officials have stated that inflation overshoot conditions have ended. Rate cuts will directly lower gold’s carrying costs, supporting prices.

• Continuous Central Bank Gold Purchases: Global central bank net gold purchases reached 634 tons in the first three quarters of 2025—while showing slight year-over-year decline, it remains far above 2010-2021 average levels. This sustained allocation demand provides stable support for gold.

• Rising Gold ETF Holdings: Global gold ETF inflows exceeded 700 tons for the year, while domestic ETF holdings increased to 247 tons. Institutional investor continued positioning reflects positive medium-term outlook.

Variables Requiring Monitoring

In the near term, attention should be paid to the Bloomberg Commodity Index (BCOM) annual rebalancing. The adjustment in early January could trigger passive reductions in gold holdings of roughly $100 billion scale, but historical data shows such selling pressure represents only technical disruption, with gold bearing notably less intensity than silver.

Medium-term, the Fed’s actual rate-cut timing, further geopolitical developments, and central banks’ gold-purchase intentions remain key variables determining gold price direction.

Summary

Gold’s pullback from $4500 to $4472 essentially reflects phased cooling of risk-off sentiment, not a trend reversal. The technical significance of breaking through the $4500 resistance level has been established, and medium-term bullish logic (rate-cut cycle, central bank purchases, ETF holdings) remains intact. Short-term adjustments actually create better technical foundations for subsequent gains. For investors, the key is avoiding distraction from short-term fluctuations, understanding medium-term support fundamentals, rather than chasing highs or panicking.