Liquidity stampede and the total failure of safe-haven logic are dragging gold into its most brutal plunge in forty years.
Spot gold has continued to slide since hitting its historical high in late January, with cumulative losses of nearly $1,000 over the past two weeks. Last week recorded the most severe weekly decline for gold since March 1983.
On March 23, spot gold completely collapsed, briefly breaking through $4,100 and falling nearly 9% within the day, marking the longest losing streak since October 2023.
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Caught between the energy crisis sparked by Middle East conflict and frozen Fed rate cut expectations, the former &#34;safe-haven&#34; has become an &#34;ATM&#34; for institutions to raise cash. Gold has not only erased all year-to-date percentage gains but is also searching for support in a cross-asset sell-off.
So, where exactly is the bottom for this falling sword? The market is currently eyeing three &#34;speed bumps&#34;: in the short term, the 200-day moving average at $4,080 is the bulls' last technical line of defense; if liquidity further deteriorates, gold prices may move toward extreme ranges of $3,900 or even $3,500. Against the backdrop of rising expectations for economic stagflation, technical support levels may only offer a brief respite.
The real &#34;gold bottom&#34; is not on the candlestick chart, but in the signals of the Federal Reserve's policy pivot. Historical logic shows that in the early stages of a crisis caused by credit contraction, gold, with its optimal liquidity, is often sold off first. Only when global financial system pressure reaches a critical point, forcing the Federal Reserve to restart quantitative easing (QE), will gold see the dawn of a true reversal.
<h2>Worst Week Since 1983: Why Safe-Haven Logic Failed</h2>
Last week, international gold prices plummeted by over 11% in a single week, marking the largest weekly decline since March 1983, rapidly falling from above $5,000 to around $4,500.
It further probed lower, briefly breaking the $4,100 mark during trading on the 23rd.
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Market analysts point out that the deeper changes behind this plunge, previously masked by market sentiment, are threefold:
First, the correlation between gold and high-risk assets has surged. The 30-day historical correlation between gold and high-beta momentum stocks has soared to 52%, a four-year high. This means gold has transitioned from a traditional &#34;safe-haven asset&#34; to a &#34;high-risk momentum asset&#34; in the short term, declining in tandem with US stocks rather than strengthening against the trend.
Second, liquidity pressure triggered the sell-off. In a market environment characterized by rising volatility, a strengthening dollar, and suppressed rate cut expectations, gold, due to its excellent liquidity, is often the first asset that institutions use for rebalancing, margin calls, or reducing Value at Risk (VaR) exposures. Coupled with massive unrealized gains accumulated over the past year, the &#34;disposition effect&#34; has further accelerated profit-taking.
Third, extremely crowded long positions triggered a stampede. The pace of fund inflows into gold from December last year to January this year was equivalent to the total inflows of the past 7 to 8 years, with positioning reaching historical record levels. Although CTA fund holdings have fallen from 2.33% a month ago to 1.23%, the historically accumulated profits still require time to digest.
If the liquidity stampede was the fuse for this plunge, the sharp contraction in central bank gold purchases explains why the decline exceeded expectations. From 2022 to 2024, global central banks purchased over 1,000 tons of gold for three consecutive years, serving as the most crucial structural support for the gold bull market. This figure dropped to 863 tons in 2025, and by January 2026, monthly purchases were only 5 tons, far below the previous monthly average of about 70 tons, a month-on-month decrease of over 90%.
Meanwhile, buyers are turning into sellers. The Polish central bank recently announced its plan to reduce its gold reserves for monetization, citing substantial profits from its holdings, with the proceeds to be used for increased defense spending. This is the latest signal from the global central bank community shifting from &#34;net purchases&#34; to &#34;profit-taking.&#34; Analysts warn that if this trend spreads, more central banks may follow suit by selling, further increasing gold supply pressure.
<h2>Close Watch on Key Support Levels</h2>
Despite short-term pressure, major Wall Street institutions maintain a medium- to long-term bullish stance on gold. Bank of America maintains a 12-month target price of $6,000, viewing the current decline as a short-term correction; UBS has a base target of $6,200, with an upside potential of $7,200 in an optimistic scenario; Goldman Sachs has set a year-end target of $5,400.
Technically, data from Gain Capital shows that gold's one-week implied volatility has jumped to 43.3%, indicating that gold prices will fluctuate violently between $4,216 and $4,766 in the short term.
Institutions are generally focused on the following three key support areas:
200-day moving average (around $4,080): This is the most immediate technical support and the moving average most closely watched by trend investors. Gold prices have fallen below the interim support levels of $4,280-$4,320, making the $4,080 line the next important defense.
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Around $3,900: This corresponds to the low area of the interim correction in October last year and is also the crucial 0.382 Fibonacci key level for this annual bull market's correction, indicating strong medium-term support.
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$3,500 to $3,600: If liquidity deteriorates more than expected, this range, corresponding to the upper bound of the weekly trading range in mid-last year, could serve as a reference bottom in extreme scenarios.
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Ponmudi R (CEO of Enrich Money) stated that if gold prices fall below the support range of $4,250-$4,400, it could further open up downside potential to $3,800-$4,000. Jateen Trivedi (VP of Commodities and Currency Research at LKP Securities) pointed out that under the dual pressures of high interest rates and continued geopolitical tensions, gold prices will maintain a volatile and weak pattern in the short term.
<h2>Rebound in Doubt: Three Disruptions Constraining Short-Term Recovery</h2>
Although the downside is limited, Guolian Minsheng Securities remains cautious about a short-term rebound in gold and cites three key arguments.
First, attacks on energy facilities are the biggest &#34;gray rhino.&#34; Between March 16 and 20, after Israel attacked Iranian gas facilities, Iran designated Saudi, Qatari, and UAE oil and gas facilities as &#34;legitimate targets.&#34; Brent crude briefly approached $120/barrel again. The report indicates that the destructive power of the seesaw effect could be unleashed again at any moment.
Second, &#34;supply guarantee and price stabilization&#34; measures are woefully inadequate. On March 19, US Treasury Secretary Bessent planned to ease oil prices by lifting some sanctions on Iranian oil. Currently, about 140 million barrels of sanctioned Iranian oil are available for release in the Persian Gulf. The report points out that 140 million barrels are only enough for global consumption for 1 to 2 days, and this measure is essentially &#34;expectations management&#34; and &#34;emotional soothing,&#34; with very limited effect on substantially easing supply tensions.
Third, the Strait of Hormuz cannot quickly return to normal. Iran can use low-cost means such as drones and mines to continuously obstruct the strait; the cost of blockade is far lower than the cost of clearing it. According to Polymarket data, the probability of the strait resuming pre-war traffic levels by the end of April has been declining since March 10, currently below 30%. Inflationary disturbances are likely to persist, continuously suppressing rate cut expectations and limiting the sustainability of precious metal rebounds.
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<h2>Waiting for Fed QE Signals</h2>
As previously mentioned in articles by Wall Street News, Jeff Currie, Chief Strategy Officer of Carlyle’s Energy Path and Non-Executive Director at Energy Aspects, offers an analytical framework that differs significantly from traditional safe-haven logic. He believes that before the Federal Reserve truly initiates QE, gold faces selling pressure, not buying opportunities.
His core logic is as follows: When supply shocks cause credit contraction, the primary concern for governments and institutions is financing rather than asset preservation. Gold, as the most liquid asset, is often the first to be liquidated. Poland's recent announcement to sell some of its gold reserves to cover expenses is a real-world manifestation of this logic. He also points out that since July 2022, the trend of oil-producing countries shifting from petrodollars to buying gold has been a major driver of the ~112% price increase in gold from July 2024 to the present—current prices have already substantially priced in geopolitical premiums and de-dollarization logic.
Jeff Currie uses March 2020 as a reference: During the liquidity crisis then, gold was also sold off. It wasn't until the Federal Reserve announced unlimited QE on March 23, 2020, that gold prices stopped falling and began to rise, subsequently experiencing a strong rally. He stated, &#34;The real logic is: short gold before you see QE, and go long once QE is initiated.&#34;
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/0a6dcc5c-8494-4ab7-b145-fb5bc4f9a47b.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/0a6dcc5c-8494-4ab7-b145-fb5bc4f9a47b.png"/>
(Jeff Currie, Chief Strategy Officer of Carlyle’s Energy Path and Non-Executive Director at Energy Aspects)
The conditions for triggering QE are accumulating: German bond auctions have failed, the US mortgage market is under pressure, and signals of global credit pool contraction are continuously increasing. Jeff Currie believes that facing the persistent supply shock caused by the blockade of the Strait of Hormuz, central banks ultimately moving towards QE is &#34;almost inevitable,&#34; and at that time, gold may see a genuine buying window.

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The market is currently eyeing three "speed bumps": in the short term, the 200-day moving average at $4,080 is the bulls' last line of technical defense; if liquidity further deteriorates, gold prices may move toward extreme ranges of $3,900 or even $3,500. Against the backdrop of rising expectations for economic stagflation, technical support levels may only offer a brief respite

- Gold prices have plunged due to a liquidity crunch and the failure of traditional safe-haven logic, with spot gold dropping nearly $1,000 in the past two weeks.  
- The sell-off has been exacerbated by increased correlation with high-risk assets and substantial liquidation by institutions under pressure.  
- Analysts warn that if this trend continues, central banks might shift from net buyers to sellers, further impacting gold supply and prices.

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Gold Plummets $1,000 in Two Weeks, Erasing Year-to-Date Percentage Gains—Has It Hit Bottom Yet?