Gold and silver remain volatile after historic January swings, but options markets suggest downside risks may be increasingly limited.
By Matt Simpson, Market Analyst
06 February 2026
Precious metals traders are navigating a market still reeling from its most volatile January on record. Gold and silver have been locked in turbulent, two-way trade after last month’s historic price swings, leaving participants questioning whether the sharp late-month sell-off was the start of a deeper correction or merely a pause before the next leg higher.
While monthly and weekly charts flash classic bearish reversal patterns, historical precedents suggest such signals can lose their potency after periods of extreme volatility. Instead, markets often enter a "shell-shocked" phase—characterized by choppy price action, false breaks, and contracting volatility. Current options market activity reinforces this view, pointing not toward capitulation but toward consolidation, with downside appearing increasingly limited.
A Historic Start to the Year
January 2026 delivered unprecedented volatility across precious metals. Gold’s monthly high-to-low range reached 22.6%—the largest since records began in 1975. Silver futures outstripped even that, recording a staggering 40% range. Both markets saw sharp reversals on the final trading day of the month, likely driven by end-of-month portfolio rebalancing and profit-taking.
These late sell-offs left significant technical marks:
Silver printed a shooting star on the monthly chart and a bearish engulfing pattern on the weekly chart.
Gold showed pronounced upper wicks on both monthly and weekly timeframes, signaling rejection at higher levels.
Monthly and weekly charts of gold and silver futures showing record January volatility, sharp end-of-month sell-offs, and bearish reversal patterns after extreme price ranges.
Source: COMEX, TradingView
Why Extreme Candlestick Signals Often Fail
While textbook technical analysis would interpret these patterns as bearish reversals, their reliability diminishes significantly after such extreme volatility. The candles themselves are often too large for practical trading frameworks, and markets tend to enter a transitional phase where price action becomes erratic and momentum fades.
This doesn’t mean volatility disappears—it remains elevated—but the character of price action shifts. Traders anticipating a repeat of January’s wide ranges in February may be disappointed. Instead, what typically follows are elevated but diminishing volatility, false breakouts, and whipsaw movements in thinner liquidity conditions.
Options Markets Tell a Different Story
Despite the aggressive sell-off in futures, options market sentiment tells a more nuanced tale.
Gold Risk Reversals Point to Consolidation
Gold risk reversals have moved lower in tandem with prices, yet call demand remains positive relative to puts. This suggests options traders are tempering near-term bullish expectations without pricing in a sustained downtrend. With gold futures holding support around the October 2025 highs, the move appears more like a consolidation after an extreme rally than the beginning of a new bearish phase. This raises the possibility that a near-term cycle low may already be in place.
Silver Options Signal Skepticism Toward Further Downside
Silver risk reversals have remained elevated despite the futures sell-off, indicating persistent demand for upside protection and a lack of panic-driven put buying. This divergence is meaningful: if traders expected another impulsive leg lower, risk reversals would typically compress or turn negative as downside protection is repriced aggressively. Instead, current positioning implies that options participants see limited downside from here, favoring either choppy consolidation or a retracement higher.
Gold and silver futures with options risk reversals showing resilient call demand after sharp sell-offs, suggesting limited downside and potential consolidation.
Source: COMEX, CME, LSEG
Short-Term Technical Perspective
On the daily charts, both metals sold off early in Asian trading today—only to recoup most losses by the European session. If prices close near current levels, they would form bullish hammer candles. Notably, today’s lows have so far held key support:
Gold respected the December high.
Silver held above the 20-week Simple Moving Average and a historical weekly Volume Point of Control (VPOC).
While it’s too early to confirm swing lows, a bounce would align with typical post-volatility behavior. The reversal during low-liquidity Asian hours suggests a liquidity hunt rather than a fundamental shift—a move that can trap bears and spark a recovery later in the session.
The Road Ahead
In the near term, traders should prepare for continued two-way volatility and whipsaw price action. Key levels to watch:
Gold: A sustained break above $2,400/oz could revive bullish momentum, while a close below $2,300 may signal deeper correction.
Silver: Holding above $28.50 is critical for bulls; a reclaim of $30.00 could trigger short-covering.
Broader macro drivers—including central bank policy, real yields, geopolitical tensions, and currency movements—will ultimately determine the next sustained trend. For now, however, the options market’s reluctance to price in further significant downside, coupled with holding key supports, suggests that the bull trend may be pausing rather than reversing.
Matt Simpson is a Senior Market Analyst at FOREX.com, specializing in technical analysis and market positioning. His commentary focuses on price action, sentiment, and intermarket dynamics.
Disclaimer: This material is for informational purposes only and does not constitute investment advice. Trading leveraged products carries a high level of risk and may not be suitable for all investors.
