Why Has Gold Prices Crashed Consecutively? Has the Safe Haven Halo Failed? Gold Has Had Six Major Plunges

Since March, as Middle East geopolitical conflicts continue to escalate and global risk aversion rises, the international gold price has shown an unusual trend.

London Gold futures have declined for nine consecutive trading days, with a weekly drop of over 10%. The largest drawdown in this cycle has reached 26%, briefly falling below $4,100 per ounce during the session, hitting a new low for the phase. The traditional saying “A cannon shot, gold worth ten thousand taels” has been broken, and the phase “failure” of gold’s safe-haven property has sparked market discussion.

Looking back at history, the gold market has experienced six major decline cycles since the 1980s:

1. (1980-1982): The Federal Reserve’s aggressive rate hikes pushed up real interest rates, suppressing the value of non-yielding gold assets. Gold prices plummeted by about 65% over two years, the largest decline in history.

2. (1983-1985): Global economic recovery boosted risk appetite, funds flowed into stocks and real estate, and combined with the Plaza Accord’s impact, gold prices fell 41% over two years.

3. (1996-1999): Multiple central banks sold off gold reserves, coupled with the US stock bull market diverting funds, leading to a 40% correction over three years.

4. (2008): The financial crisis triggered liquidity crunches, with cash king logic dominating the market. High-liquidity assets were sold indiscriminately, and gold prices fell 30% within seven months.

5. (2011-2015): US economic recovery prompted the Fed to signal tapering of QE, tightening monetary policy, strengthening the dollar, and easing inflation. Gold prices declined 45% over four years.

6. (2022-2023): The Fed’s aggressive rate hike cycle pushed up real interest rates, and the strong dollar suppressed gold prices, with a 20% decline over eight months.

Comparing these cycles, it is clear that each deep correction in gold prices is highly correlated with rising real interest rates, a strengthening dollar, risk asset attraction, and central bank gold sales. The shift in Fed policy is a key trigger.

Regarding this round of gold price decline, many brokerages believe that the sharp drop is not due to a disappearance of safe-haven demand but a shift in pricing logic from geopolitical risk-driven to interest rate and dollar-driven. Coupled with high oil prices boosting inflation, hawkish Fed statements, liquidity crunches, profit-taking at high levels, and other factors, gold has temporarily diverged from geopolitical risks.

Brokerages generally agree that this correction is a deep adjustment within a bull market rather than a trend reversal. Short-term, gold prices may fluctuate under pressure, but the downside is limited. Long-term support from central bank gold purchases, weakening dollar credibility, and normalized geopolitical risks remains solid. It is recommended to seize the “slow rise, fast fall” rhythm of gold, and consider long-term positions on dips.

Geopolitical escalation causes gold prices to plunge, safe-haven assets temporarily “fail”

After the outbreak of conflict between the US and Iran, spot gold briefly surged from $5,222.30 per ounce on February 27 to $5,313.9 on March 2, then entered a continuous decline, completely diverging from market expectations. As of March 19, WTI and Brent crude oil prices increased by 40%-50% in total, Dubai crude surged 134%, while gold became one of the few assets to weaken amid the geopolitical storm.

Market performance shows three main features of this gold correction: first, rapid decline with large amplitude, nine consecutive days of decline setting recent records, with weekly drops exceeding 10%; second, synchronized weakness with risk assets, with gold failing to serve as a safe haven during global stock corrections, instead facing concentrated selling pressure; third, the dollar and gold move inversely, with safe-haven funds shifting to dollar assets, forming a “strong dollar, weak gold” pattern.

Yuekai Securities pointed out that the “chaos gold” phenomenon is a market misinterpretation. The current conflict is not a sudden black swan; the deadlock in US-Iran negotiations and US military buildup since early 2026 have been priced in by the market in advance. From January 22 to March 2, London Gold rose 10.11% to $5,400 per ounce, approaching historical highs. After the conflict materialized, funds “buy expectations, sell reality,” directly triggering the gold price plunge.

Four major pressures suppress gold prices

According to multiple brokerages, the core driver of this gold decline is the rise in actual interest rates, compounded by a strong dollar, liquidity shocks, and crowded trading, forming four major pressures:

1. Rising oil prices boost inflation, and higher real interest rates squeeze gold.

The Middle East conflict pushed oil prices above $100 per barrel, sharply raising global inflation expectations. The March Fed meeting raised 2026 PCE and core PCE forecasts to 2.7%, with most officials supporting only 0-1 rate cuts. Chairman Powell explicitly stated, “We will not cut rates until inflation clearly declines.”

Galaxy Securities believes that as a non-yield asset, gold’s price mainly depends on the opportunity cost of holding. Expectations of rising real interest rates directly increase the holding cost of gold, which is the fundamental reason for gold’s decline despite escalating geopolitical conflicts. From March 2 to 19, US 10-year Treasury yields rose 20 basis points, with real interest rates becoming a major contributing factor.

2. The strong dollar, combined with capital diversion, suppresses prices.

Gold is priced in dollars, and the dollar index and gold prices are highly negatively correlated. During this conflict, risk-averse funds did not flow into gold but preferred high-yield, highly liquid dollar assets: on one hand, the US benefits from rising energy prices as a net oil exporter; on the other, high interest rates make holding dollars more attractive than non-yielding gold.

Tianfeng Securities pointed out that the current risk-adjusted value of the dollar is significantly higher than gold, with rising interest rates and hawkish policies jointly boosting the dollar, leading to capital shifting from gold to dollar assets, creating a “rising dollar, falling gold” transmission chain.

3. Liquidity crunch amplifies volatility, turning gold into a passive liquidation tool.

Amid increased global market volatility, institutions face margin pressures and portfolio adjustments. Gold, with its high liquidity, becomes a preferred asset to liquidate. Additionally, over the past two years, gold prices surged from around $2,000 to nearly $5,000 per ounce, with high trading congestion. Geopolitical conflicts triggered profit-taking, leading to passive selling and amplifying the decline.

4. Central bank gold purchases slow, weakening short-term support.

In 2025, global central banks net purchased over 300 tons of gold, providing long-term structural support. However, early 2026 saw a slowdown, with countries like Poland and Russia even selling gold temporarily. Galaxy Securities noted that central bank gold buying is a long-term allocation, with a slow pace that cannot offset short-term interest rate and liquidity shocks. The market lacks stable buying support in the short term, making gold prices more susceptible to macro expectations.

The gold pricing logic has shifted

Western Securities and Galaxy Securities both state that the gold pricing framework has undergone a phased shift: the previous two years’ “credit logic” driven by de-dollarization, geopolitical risks, and central bank gold purchases has temporarily given way to the traditional “inflation-interest rate-dollar” logic.

Galaxy Securities also pointed out that historically, conflict escalation often triggered capital inflows into gold, but currently, markets prioritize trading inflation and interest rate paths. Even with rising geopolitical risks, as long as real interest rates rise and the dollar strengthens, gold will struggle to maintain strength. United Securities further proposed the “gold-oil tug-of-war” effect: supply shocks push up oil prices → inflation fears intensify → Fed rate cut expectations cool → precious metals prices decline. This transmission path is clearly evident in this round of market.

Meanwhile, the deadlock in US-Iran conflicts has weakened gold’s safe-haven appeal. United Securities believes that gold’s safe-haven attribute depends on conflict intensity and spread. Currently, the conflict is limited to the US, Israel, and Iran, without full escalation. The market’s risk pricing is gradually dulling, and safe-haven demand is unlikely to drive gold prices higher.

Limited short-term downside, long-term bull market intact

Regarding future gold prices, brokerages believe that short-term fluctuations will continue but with limited downside; the long-term support remains firm, and the correction does not signal a trend reversal.

In the short term, gold prices are approaching a critical point. Rebound requires catalysts. United Securities estimates that the maximum drawdown of London Gold has reached 17%, close to the 20% historical critical level. Short-term, prices are expected to bottom around $4,300-$4,500 per ounce. The market has already priced in no rate cuts in 2026; a decline beyond 20% would require Fed rate hikes, which are unlikely.

However, United Securities also warns that the basis for a short-term rebound is weak: if the US, Israel, or Iran attack energy facilities again, oil prices could spike, triggering another gold-oil tug-of-war. The probability of the Hormuz Strait returning to normal by late April has fallen below 30%. Inflation shocks are unlikely to subside in the short term, and gold will continue to be pressured by interest rate expectations.

From a medium- to long-term perspective, gold still has three solid supports, offering opportunities for allocation. CITIC Securities, Guosheng Securities, and Yuekai Securities agree that the long-term upward logic remains intact, with three core supports: first, the ongoing global central bank gold purchase trend and de-dollarization process; second, the continued weakening of dollar credibility due to US fiscal unsustainability and frequent geopolitical conflicts; third, stagflation risks will eventually favor gold, especially if oil shocks shift from “inflation” to “stagnation,” prompting the Fed to shift from tightening to easing, which would lower real interest rates and drive gold higher again.

Tianfeng Securities presents two scenarios: if inflation remains high and the Fed continues tightening, gold may face a phased bear market; if economic growth slows and policies turn easing, gold prices will resume upward. Currently, the market is caught between “anti-inflation” and “growth stabilization” policies.

Seize the “slow rise, fast fall” rhythm, and build long-term positions on dips

Based on gold price trends, brokerages offer advice. Tianfeng Securities suggests monitoring signals of US-Iran escalation/de-escalation and key support levels of the 100-day moving average. United Securities recommends capitalizing on the “slow rise, fast fall” feature by building positions on dips and gradually lowering long-term costs.

Guosheng Securities believes gold has entered a left-side allocation zone, with geopolitical easing or stagflation expectations potentially catalyzing a rebound. Western Securities indicates that the timing for rebalancing gold holdings depends on energy prices peaking and monetary policy stabilization; after hawkish expectations are repaired, increasing allocations is advisable.

This round of international gold price plunge is essentially a restructuring of pricing logic amid macro environment shifts. Under the interplay of geopolitical conflicts, high oil prices, and Fed policies, gold is temporarily dominated by interest rates and the dollar in the short term, but core long-term drivers like central bank gold purchases and the reconfiguration of the credit monetary system remain unchanged. For investors, the current volatility presents a long-term allocation opportunity, requiring close attention to inflation data, Fed statements, and Middle East developments to grasp the next gold rally after interest rate shifts.