Precious Metals Correction: Gold and Silver Retreat Despite Supply Squeeze Signals

The blistering rally in precious metals paused on Tuesday, with spot prices facing significant profit-taking pressure despite underlying structural risks in the futures market.

Volatility Normalizes as Prices Dip

Spot Gold (XAU/USD) shed approximately 1% to trade near $5,016.56 per ounce, retreating from recent historical highs. Silver (XAG/USD) suffered a steeper decline, plunging 2.5% to $81.31.

Market analysts attribute the pullback to a “volatility normalization” following aggressive clearing measures by the CME. However, the technical outlook remains complex.

The Silver Delivery Crisis

Despite the immediate price drop, supply-side indicators are flashing warning signals. Data regarding the March Silver futures contract reveals a potential delivery crisis:

• Open Interest is currently 4 times the size of available inventory.
• Physical withdrawal speeds have hit historical records.

This divergence between paper price action (selling) and physical market realities (record withdrawals) suggests elevated volatility may persist as the March contract expiry approaches.

Inflation Data in Focus

Complicating the picture is the upcoming USJanuary inflation print. Preliminary reports suggest that corporate price hikes combined with tariff costs could push headline numbers higher. However, economists warn that seasonal adjustments might distort the data, advising traders to interpret potential spikes with caution before betting on a hawkish Fed pivot.