After the overnight plunge in gold and silver, traders are closely watching the "technical success and failure line": gold at $4,000, silver at $48

After experiencing a sharp sell-off in the overnight market, tensions in the precious metals market have suddenly escalated.

On Tuesday, the spot gold price plummeted by 6.3% at one point during the session, marking the largest single-day drop in over 12 years. This volatility is regarded as a rare "5-sigma" event. The gold price briefly dipped to the psychological level of $4000, which coincides with its 21-day moving average. Although gold prices rebounded slightly afterward, they still face significant pressure. From a technical perspective, $4000 is currently the most important support level for gold. If gold falls below $4000, the next support may be at $3800.

Meanwhile, the silver market is also under pressure. Silver prices are fluctuating around their 21-day moving average and hovering near the critical level of $48. Analysts point out that this level is the "line of success or failure" for silver in the short term, and its effectiveness will directly impact investor sentiment. If it falls below $48, it may drop to $44.

According to Goldman Sachs analysis, this sharp decline has no "obvious trigger" and is mainly due to the market becoming excessively crowded with long positions after a continuous rise. Goldman Sachs traders described the gold price chart as resembling a crashing "meme stock." Traders are closely monitoring the key technical levels of $4000 per ounce for gold and $48 per ounce for silver, as their movements will provide decisive guidance for the market's short-term direction.

Gold: $4000 Becomes a Key Watershed

Technical charts show that the gold price has moved to a level "far below" the 8-day moving average, indicating short-term downward pressure.

The gold price precisely tested the support at $4000 during the overnight low, which is not only an important psychological level but also where the 21-day moving average is located. Subsequently, although the gold price rebounded slightly, it is currently trading right on an upward trend line formed since September of this year, indicating a fierce battle between bulls and bears.

From a technical perspective, $4000 is currently the most important support level for gold. Whether viewed from the moving average or Fibonacci retracement perspective, this level is extremely "significant." If it falls below, the next area of support to watch will be around $3800, with the 50-day moving average not far below. On the upside, initial resistance is at $4200.

For this rare crash in the past decade, the market generally believes that technical factors are the dominant force. Adam Gillard, an expert from Goldman Sachs' commodity trading desk, analyzed that there was "no obvious trigger" for the recent drop in gold prices, which first weakened during the Asian session and then triggered a large number of stop-loss orders after the opening of the London and U.S. markets.

Gillard believes that the best explanation is the "position" issue. After experiencing nine consecutive weeks of gains, the market became extremely crowded, and a "cleaning" of positions may have been inevitable. Market observations provided by Goldman Sachs also confirm this: during the previous days of continuous gold price increases, the trading desk received almost no inquiries from clients; in most client surveys, over 80% of respondents were bullish on gold prices; at the same time, an increasing number of accounts from non-commodity sectors also began to allocate gold. This one-sided bullish sentiment laid the groundwork for a technical "stampede."

Silver: $48 as the Short-term "Success or Failure Line"

The trend of silver is equally gripping, with its price hovering around the critical $48 level, which analysts view as the short-term "success or failure line."

Analysis points out that $48 is the dividing line between bullish and bearish forces in the current market, and its importance is also confirmed by Fibonacci retracement analysis. Currently, silver prices are fluctuating around their 21-day moving average, and a shorter-term trend line is also located just below $48, forming a dense support area.

For investors, if silver prices cannot hold above $48, it may open up further downside potential, with the next major support level being the 50-day moving average at $44. Conversely, if it stabilizes and rebounds, the first upward resistance will appear around the midpoint of the recent "big bearish candle," while higher resistance areas will be around $52.