"Is the old saying 'buy gold in troubled times' failing? The triple threat behind the biggest weekly drop in gold prices in 43 years"

In the third week of March 2026, the global financial markets witnessed a scene that defied conventional wisdom: with the Middle East engulfed in war, oil prices skyrocketing, and stock markets around the world in turmoil, gold should have been a safe haven for funds. However, international gold prices instead experienced a heart-stopping plunge. COMEX gold futures fell by over 11% in a single week, dropping to around $4,505 per ounce, marking the largest weekly drop in 43 years since 1983. The main Shanghai gold contract also plummeted, with a single-day drop of 4.99% on March 19, falling to 1026.74 yuan per gram, erasing almost all of its gains for the year. The starting point for this round of sharp decline can be traced back to the historic peak of $5,589 per ounce in late January. Since then, the cumulative decline in London Gold prices has exceeded 18%. The market belief of "when the cannons roar, gold will rise" is undergoing a brutal stress test. The "stranglehold" of three forces The sharp decline in gold prices is not due to a single factor, but rather the result of three forces acting simultaneously and reinforcing each other. First: Impact of oil prices -> Inflation panic -> Rising interest rate expectations. This is the core 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 spot crude oil prices skyrocketing by 134%. The soaring oil prices directly raise global inflation expectations, forcing the market to reassess the monetary policy paths of various central banks. The Fed maintained its interest rates at the March meeting, but Powell clearly signaled a hawkish stance: interest rate cuts must be based on a slowdown in inflation. CME data shows that the possibility of interest rate cuts in the first half of the year has been completely ruled out by the market, with even a 10% probability of interest rate hikes within the year. As a zero-interest asset, the cost of holding gold is directly constrained by the interest rate environment - the higher the interest rate, the higher the opportunity cost of holding gold, and the heavier the pressure on gold prices. Second: Profit-taking at high levels, "buy rumor, sell fact". The US-Iran conflict was not without warning. As early as the beginning of 2026, the market was fully aware of the deadlock in US-Iran negotiations and the accelerated military build-up by the US. When Trump announced the deployment of troops to Iran on January 22, gold continued to rise, and by March 2 when the conflict officially broke out, London Gold had already accumulated a rise of over 10%, approaching the previous high. Smart money began to exit after the conflict "landed". Non-commercial net long positions on COMEX gold had been at crowded highs, and the outbreak of the conflict became a signal to cut long positions. Third: Liquidity panic, passive selling leading to a stampede. The intense volatility in global stock markets triggered a chain reaction. For example, in South Korea, after the outbreak of the conflict, the Korea Composite Index fell by 7.2% and 12.1% on consecutive days, triggering a circuit breaker. Prior to the conflict, South Korea's margin balance was at historic highs, with some weighted stocks having margin ratios 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 gains, became the preferred liquid asset for investors to "sell gold to cover stock margin". Bloomberg data shows that gold ETFs have faced net outflows for three consecutive weeks, with holdings reduced by over 60 tons in three weeks, completely wiping out net inflows for the year. Why did the belief in "chaos gold" fail? "Buy gold in times of chaos" is one of investors' most deeply-rooted beliefs, but history has repeatedly shown that this belief has a key blind spot: when a real crisis strikes, gold will also be sold off. After the collapse of Lehman Brothers in 2008, gold prices fell from $900 to $682 at one point, a drop of over 20%. During the panic of March 2020, gold fell from $1,700 to around $1,400. The common feature of these two crises is that - all assets are being sold off, and only the US dollar cash is the last refuge. The current US-Iran conflict also exhibits a similar feature: from February 27 to March 18, the US Dollar Index rose by 2.57%, while London Gold fell by 7.10%, showing a clear negative correlation between the two. The deeper reason is that the pricing logic of gold has fundamentally changed. Data from the World Gold Council shows that since 2022, the annual average purchase volume of gold by global central banks has soared from the previous 473 tons to over 1,000 tons, accounting for over 20% of total gold demand. The continuous large-scale purchases by central banks have effectively built a solid "floor" for gold prices. However, the problem is that central bank purchases of gold have not crowded out private investment demand, but have instead created a "signaling effect" - a large amount of speculative capital has followed suit, pushing non-commercial net long positions on COMEX to historic highs. When speculative capital becomes the marginal force in pricing, the trading characteristics of gold are increasingly resembling those of a high-volatility risky asset: during rallies, it is driven by emotions and leverage, while during declines, it is due to stampedes and stop-losses. As pointed out by GoldSilver's analysis, in mid-March, after news of Iran threatening to block the Strait of Hormuz came out, gold prices briefly soared from $5,296 to $5,423, before quickly and sharply reversing to a drop of over 6% - this is a typical behavior of liquidity shock in the futures market, unrelated to fundamentals. After the crash: End of the bull market or deep correction? Panic tends to lead to extreme judgments. However, from various perspectives, the current crash is more likely a deep correction in the bull market process, rather than a signal of trend reversal. From a valuation perspective, even after experiencing an 18% retreat, gold prices are still up by around 8% for the year, and are still above the 50-day and 200-day moving averages. The 14-day RSI indicator has fallen to around 35, approaching oversold territory, presenting technical conditions for a rebound. From an institutional judgment perspective, major Wall Street investment banks have hardly lowered their year-end gold price targets. JPMorgan maintains a target price of $6,300; UBS gives a benchmark forecast of $6,200, with an optimistic scenario reaching $7,200; Goldman Sachs has a target price of $5,400, emphasizing upside risks; Deutsche Bank targets $6,000; and Credit Suisse has significantly raised its target price from the previous range of $4,500 - $4,700 to $6,100 - $6,300. From a structural DRIVE perspective, the long-term logic supporting gold prices has not faded. Non-US central banks' interest in gold remains strong - China and India's gold reserves as a proportion of total reserves are still below 20%, far lower than Germany and France's levels of over 80%, leaving ample room for allocation. The Trump administration's "business negotiation-style diplomacy" continues to erode the US dollar credit system. Global fiscal deficits remain high, with US debt exceeding $38 trillion. These structural factors will not change due to a short-term crash. What to watch in the short term? In the short term, the direction of gold prices will depend on two key variables: First is the evolution of the US-Iran conflict. If the conflict is brought under control within a month and oil prices fall, easing inflation pressure, gold prices are likely to stabilize and rebound. If the conflict continues and spreads to other countries in the Middle East, global energy dynamics and policy responses will face great uncertainty, keeping gold under pressure. Second is the policy signals from the Federal Reserve. The speeches of Fed officials next week will be crucial for market pricing. If officials signal that "inflation effects are manageable and do not rule out rate cuts within the year," gold prices will find some breathing room; otherwise, if a hawkish stance is further strengthened, gold prices may face a deeper adjustment. Looking at a longer time horizon, the judgment of Luo Zhiheng, Chief Economist of Yue Kai Securities, is worth noting: The annualized returns of gold in the past three years far exceed the historical average (13% in 2023, 27% in 2024, 60% in 2025, compared to a 30-year average of 6.6%), making it more likely for the average to return in 2026 than for the gains to surpass it. However, if global economic risks shift from "inflation" to "stagnation" and the Fed is forced to turn to easing, gold prices are still likely to find support, making the current crash more likely a deep correction on the way up, rather than a signal of the end of the bull market. For ordinary investors, the situation of gold mining stocks may be more challenging. Bloomberg reported that the NYSE Arca Gold Miners Index plunged by 10% in a week, erasing all gains for the year. Jefferies analyst Christopher Lafemina warned that the decline in gold prices combined with rising energy and consumables costs pose a "double blow" to mining companies. The market always swings between fear and greed. The largest weekly drop in 43 years is shocking, but history repeatedly reminds us that in the super cycle of gold, the most painful corrections are often the best entry points. The premise is - you must distinguish whether this is a correction in a bull market or a signal of the end of the bull market.