Geopolitical policies drive volatility in the precious metals market

Major geopolitical developments are exerting significant pressure on gold and silver prices this week. From decisions related to Venezuela relations, defense strategies, to legal debates over tariffs, macroeconomic factors have completely replaced positive signals in the market.

Venezuela and Crude Oil: A Turning Point in Global Energy Supply

Trump administration’s strategy to control up to 50 million barrels of Venezuelan crude oil is causing rapid shifts in the global energy market. After the information was announced, US oil traders and refineries hurried to adjust their positions to access this supply.

This is considered one of the biggest unexpected supply disruptions in recent years. Venezuela, with the world’s largest oil reserves, currently produces less than 1 million barrels per day due to decades of underinvestment and economic sanctions. If this strategy is implemented, it could mark one of the most significant changes in the global energy market.

According to reports, US Energy Secretary Chris Wright announced details of this strategy on Wednesday. This involves the federal government directly engaging in the international oil market, potentially reactivating Venezuelan oil supplies for US refineries after years of isolation.

However, Bloomberg points out that without a clear political and legal environment, many drilling companies will remain cautious about returning to Venezuela. Although major US oil companies are expected to meet with Trump at the White House in the coming days, uncertainty still persists.

The impact of this situation has caused Canadian oil prices to plummet sharply, putting considerable pressure on benchmark crude oil prices. Currently, crude oil is trading around $57.00 per barrel.

Defense and Tariffs: Two Main Pillars of Economic Policy

President Trump has proposed increasing the US annual defense budget by an additional $500 billion to $1.5 trillion. At the same time, he signed an executive order requiring major defense contractors to cease stock buybacks and dividend payments, limiting executive compensation to a maximum of $5 million per year.

This statement caused shares of major defense contractors such as Raytheon Technologies, Northrop Grumman, Lockheed Martin, and General Dynamics to decline simultaneously.

Regarding tariffs, the US Supreme Court may issue a ruling on Friday on whether Trump can use the International Emergency Economic Powers Act of 1977 to impose import tariffs. Lower courts have ruled that Trump’s invocation of this law to protect tariffs on trading partners exceeds his authority.

If the Supreme Court finds these tariffs illegal, most of the tariffs imposed during Trump’s second term could be invalidated, and the US government may have to refund tens of billions of dollars. However, his tax policies still have other avenues for implementation, although these alternatives come with more restrictions and procedures.

Labor Market and Gold/Silver Pressure

Latest data from Challenger, Gray & Christmas shows that layoffs in the US in December fell to the lowest level since July 2024, with 35,553 people, down from 71,321 in November. However, in 2025, US employers announced a total of 1,206,374 layoffs, up 58% compared to 2024 and the highest since 2020.

The government sector led with 308,167 layoffs, mainly at the federal level; in the private sector, technology saw the most layoffs with 154,445 people. This reflects the impact of rapid AI development combined with overhiring in recent years.

Gold and Silver: Strong Selling Pressure Today

During Thursday’s early US trading session, both gold and silver faced sharp declines. Silver’s drop was particularly deep, mainly due to short-term futures traders taking profits and weak long positions being liquidated. The silver market formed a technical bearish pattern, causing investor panic.

February gold futures are recorded at $4,431.7/ounce, down $30.8; March silver futures are at $73.83/ounce, down $3.783.

According to Citi Group, approximately $6.8 billion worth of silver futures contracts may be sold to meet the rebalancing requirements of the annual commodity index, with a similar outflow of funds from gold futures. Bloomberg notes that the recent sell-off was driven by a significant increase in the weighting of precious metals in the benchmark commodity index.

An old trading adage states that a mature growth market needs continuous positive news to sustain its upward momentum. Currently, these two precious metals seem to lack such positive support.

Technical Analysis and Price Targets

Gold: The next bullish target for February gold futures is to close above the key resistance level—the contract’s all-time high of $4,584.00/ounce. The nearest bearish target is to push the futures below the important technical support at $4,284.30/ounce.

The first resistance is the highest level last night at $4,475.20/ounce, followed by $4,500.00/ounce; the first support is $4,400.00/ounce, followed by the weekly low at $4,354.60/ounce. Based on the 2010 and subsequent years’ gold price charts, these technical patterns reflect the repetition of major market cycles.

Silver: This week’s movement of March silver futures has raised concerns about the formation of a double top reversal pattern on the daily chart. The next bullish target is to close above the key resistance level—the all-time high of $82.67/ounce.

The next bearish target is to close below the key support level—the previous week’s low of $69.225/ounce. The first resistance is $75.00/ounce, followed by $76.00/ounce; the next support levels are $74.00/ounce and $72.50/ounce.

Summary Remarks

Currently, the US dollar index is slightly up, while the US 10-year government bond yield stands at 4.16%. Note that the gold market operates under two pricing mechanisms: the spot market (with the price quoted as the purchase and immediate delivery) and the futures market (determining the delivery price at a future date). Due to position adjustments and market liquidity, December gold futures are now the most actively traded contract on the Chicago Mercantile Exchange (CME).