"Buying gold in troubled times" is losing its charm? The triple squeeze behind the largest single-week decline in gold prices in 43 years.

In the third week of March 2026, the global financial markets witnessed a counterintuitive scene: wars raging in the Middle East, oil prices soaring, and stock markets worldwide in turmoil - according to textbook logic, gold should have been a safe haven with funds rushing in. However, international gold prices staged a heart-stopping plunge. COMEX gold futures fell by more than 11% in a single week, dropping to around $4505 per ounce, marking the largest weekly drop in 43 years since 1983. Domestic Shanghai gold futures contracts also plummeted, with a single-day drop of 4.99% on March 19, falling to 1026.74 yuan per gram, almost wiping out all gains for the year. The starting point of this round of collapse can be traced back to the end of January when the gold price hit a historic high of $5589 per ounce. From the top to now, London gold has accumulated a drop of over 18%. The market belief of "when the cannons roar, gold will shine" is going through a brutal stress test. The "stranglehold" of three forces The plunge in gold prices is not caused by a single factor but rather the result of three forces acting simultaneously and reinforcing each other. First, oil price impact inflation panic rising interest rate expectations. This is the most basic logic chain. Since the outbreak of the US-Iran conflict on March 2, WTI and Brent crude oil prices have risen by 40%-50%, with Dubai crude oil spot prices surging by 134%. The soaring oil prices directly raised global inflation expectations, forcing the market to reassess the monetary policy paths of various central banks. The Federal Reserve maintained interest rates at its March meeting, but Powell clearly signaled a hawkish stance: interest rate cuts must be predicated on a slowdown in inflation. CME data shows that the market has completely ruled out the possibility of rate cuts in the first half of the year, and there is even a roughly 10% probability of rate hikes this year. As a zero-yield asset, the holding cost of gold is directly constrained by the interest rate environment the higher the interest rate, the greater the opportunity cost of holding gold, and the more pressure on gold prices. Second, profit-taking at high levels, "buy the rumor, sell the news". The US-Iran conflict was not without warning. As early as the beginning of 2026, the market was already fully aware of the deadlock in US-Iran negotiations and the accelerated military buildup by the US. When Trump announced the deployment of heavy troops to Iran on January 22, gold prices continued to rise, reaching a cumulative increase of over 10% by March 2 when the conflict officially broke out, nearing the previous high. Smart money concentrated on exiting after the conflict was "settled". Non-commercial net long positions in COMEX gold had been at crowded high levels before the conflict broke out, and the outbreak of the conflict became a signal for longs to close out. Third, liquidity panic leading to passive selling and stampede. The severe volatility in global stock markets triggered a chain reaction. Taking South Korea as an example, after the outbreak of the conflict, the South Korean composite index fell by 7.2% and 12.1% on two consecutive days, triggering a circuit breaker. The margin balance in the Korean market had been at a historical high before the conflict, with the leverage ratio of some blue-chip stocks as low as 30%-40%, and the sharp drop in stock prices forced high-leverage long positions to urgently raise funds. Gold, which had accumulated a large amount of unrealized profits in the previous period, became the preferred target for investors to "sell gold to cover stock margin". Bloomberg data shows that gold ETFs have faced three consecutive weeks of net outflows, with holdings decreasing by over 60 tons in three weeks, completely erasing all inflows for the year. Why did the concept of "chaos gold" fail? "Buying gold in times of chaos" is one of the most deeply ingrained beliefs of investors, but history repeatedly proves that this belief has a key blind spot: when a real crisis hits, gold will also be sold off. After the collapse of Lehman Brothers in 2008, the gold price fell from $900 to $682 at one point, a drop of over 20%. During the panic in March 2020, gold fell from $1700 to around $1400. The common feature of these two crises is - all assets are being sold off, with only US dollars being the last refuge. The current US-Iran conflict also shows a similar feature: from February 27 to March 18, the US dollar index rose by 2.57%, while London gold fell by 7.10%, indicating a clear negative correlation between the two. The deeper reason lies in the fact that the pricing logic of gold has undergone a fundamental change. Data from the World Gold Council shows that since 2022, the average annual purchase of gold by central banks worldwide has surged from 473 tons to over 1000 tons, accounting for over 20% of total gold demand. The continued large-scale purchases by central banks have essentially built a solid "bottom" for the gold price. However, the problem is that central bank purchases of gold have not displaced private investment demand, instead creating a "signal transmission effect" - a large amount of speculative funds follow suit, leading to non-commercial net long positions on the COMEX staying at historical high levels. When speculative funds become the marginal force in pricing, the trading characteristics of gold become more and more like a highly volatile risk asset: when it rises, it is driven by emotion and leverage, and when it falls, it is due to stampede selling and stop losses. As pointed out by GoldSilver's analysis, after news of Iran's threat to block the Strait of Hormuz came out in mid-March, gold prices initially surged from $5296 to $5423, before quickly reversing and dropping by over 6% - this is a typical behavior of liquidity shock in the futures market, unrelated to fundamentals. After the plunge: the end of a bull market or a deep correction? Panic often leads to extreme judgments. However, from multiple perspectives, the current plunge appears more like a deep correction in the bull market process rather than a signal of trend reversal. From a valuation perspective, even after experiencing an 18% retracement, gold prices have recorded a gain of around 8% for the year and are still above the 50-day and 200-day moving averages. The 14-day RSI indicator has dropped to around 35, approaching oversold territory, providing technical conditions for a rebound. From an institutional perspective, the year-end gold price targets of major Wall Street investment banks have almost remained unchanged. JPMorgan Chase maintains a target price of $6300; UBS offers a base prediction of $6200, with an optimistic scenario seeing $7200; Goldman Sachs has a target price of $5400, emphasizing an upward bias; Deutsche Bank aims for $6000; and Credit Suisse has significantly raised its target price from the previous $4500-4700 to $6100-6300. From a structural perspective, the long-term logic supporting the gold price has not diminished. Non-US central banks' willingness to purchase gold remains strong - the proportion of gold reserves to total reserves in China and India is still less than 20%, far below the levels of over 80% in Germany and France, indicating significant room for increased allocations. The Trump administration's "business negotiation-style diplomacy" continues to erode the US dollar credit system. Global fiscal deficits remain high, with the size of US national debt surpassing $38 trillion. These structural factors will not change due to a short-term plunge. What to focus on in the short term? In the short term, the direction of gold prices will depend on two key variables: The first is the evolution of the US-Iran conflict. If the conflict is brought under control within a month, a fall in oil prices will ease inflation pressures, and gold prices are expected to stabilize and rebound. If the conflict prolongs and spreads to other countries in the Middle East, the global energy landscape and policy response will face significant uncertainty, and gold may continue to be under pressure. The second is the policy signals from the Federal Reserve. The series of speeches by Federal Reserve officials next week will be key to market pricing. If officials signal that "inflation effects are controllable and do not rule out rate cuts by the end of the year," gold prices will get some breathing room; on the other hand, if the hawkish stance is further strengthened, gold prices may face a deeper correction. From a longer-term perspective, the judgment of Luo Zhiheng, Chief Economist of Yuekai Securities, is worth noting: The annualized returns of gold in the past three years have far exceeded the historical average (13% in 2023, 27% in 2024, and 60% in 2025, compared to the 30-year average of 6.6%), making it more likely that the average will return in 2026 than for the gains to continue breaking through. However, if global economic risks shift from "inflation" to "stagnation," forcing the Federal Reserve to turn to easing, gold prices still have the potential for support, and the current plunge is more likely a deep correction in an upward trend, rather than a signal of the end of a bull market. For ordinary investors, the situation for gold mining stocks may be even more challenging. Bloomberg reports that the NYSE Arca Gold Miners Index fell by 10% at one point in the week, erasing all gains for the year. Christopher La Femina, an analyst at Jefferies, warns that the decline in gold prices combined with rising energy and materials costs will lead to a "double blow" to the profit margins of mining companies. The market always swings between fear and greed. The largest single-week drop in 43 years is enough to shock, but history reminds us time and time again: in gold's super-cycle, the most painful pullbacks are often the best entry points. The prerequisite is - you must distinguish whether this is a retracement in a bull market or a signal of the end of the bull market.