What's behind the selloff in gold and silver?

Core Viewpoint - The current state of the gold market is concerning due to its significant extension above moving averages, suggesting a potential correction of 20-25% from recent peaks [1][11]. Market Dynamics - Gold's rapid increase in value is alarming, especially in relation to other markets like crude oil, which is experiencing unprecedented declines [2]. - The low stock market volatility, recorded at 8.9%, indicates a potential increase in volatility as year-end approaches, possibly signaling deflationary trends [3][11]. Price Movements - Gold prices have surged from approximately 3,400 to a peak of 4,356, with a normal correction expected around 3,500, representing a 20-30% decline from current levels [12][14]. - The price of gold around $2,000 was considered a good value, but at $4,000, it is perceived as too expensive, indicating a lack of buying elasticity [6][7]. Trading Volume and Central Bank Activity - The total reserves of gold held by central banks have surpassed those of the US dollar, partly due to rising prices, but open interest in futures has not increased significantly during this rally [9][10]. - The largest buying activity is attributed to the Chinese central bank, highlighting a shift in market dynamics [10]. Technical Analysis - Historical data shows that the last significant stretch above the 200-day moving average occurred in 2006, leading to a 25% correction before prices increased again [11]. - The support level for gold is currently viewed around 4,000, but a more substantial correction is anticipated, with traders looking for opportunities to buy at lower levels [13][14].