Author: Deep Tide TechFlow
Original Title: Gold Has Stabbed Everyone in the Back
On March 23, spot gold fell to $4,100 during trading, erasing all gains for the year.
Looking back 57 days ago, gold was still standing at its historical peak of $5,600. From the highest point to now, the decline has exceeded 27%, marking the most severe drop for gold since 1983.
Remember that day on January 29, when countless analysts worldwide were still shouting, "Gold will break $6,000," only to be met with a massacre.
Gold bulls, no one survived.
Those on Xiaohongshu who once flaunted gold bars, boasted about their gains, and posted selfies are now drowning in a sea of lamentations.
The epicenter of it all is in the Middle East. The U.S.-Israel strikes on Iran have entered their 24th day, the Strait of Hormuz is closed, oil prices have broken through $100, and the flames of war are burning fiercer.
War should push up gold prices—this is common sense accumulated over thousands of years of human history. But this time, common sense has failed.
Many attribute the cause to interest rates, the U.S. dollar, stop-loss orders... These are not wrong, but the real issue might be: when panic strikes during a crisis, institutions don’t seek preservation of value; they seek liquidity.
The gold you bought is no longer the gold you thought it was.
Is Gold Not a "Safe-Haven Asset"?
Over the past three years, gold has risen from under $2,000 to a historical high, with a cumulative increase of over 150%.
Throughout this rise, the market had a ready-made explanation:避险 in troubled times, the collapse of U.S. dollar credibility, increased reserves by emerging market central banks, de-dollarization... Each point made sense on its own and was quite鼓舞人心.
But this explanation doesn’t hold up to data scrutiny.
During the peak U.S. inflation years of 2021 to 2022, gold fell for two consecutive years. After 2023, as inflation gradually cooled, gold began to soar. The relationship between the two shows a strong negative correlation. In other words, the higher the inflation, the more gold fell; the lower the inflation, the more gold rose. The phrase "buy gold to hedge against inflation" has been a contrarian indicator over the past three years.
The Fed’s real interest rates remained high during these three years, yet the textbook rule that "high interest rates suppress gold prices" quietly失效.
Even more intriguing is the relationship between U.S. stocks and gold. The two almost moved hand in hand, rising and falling together. One is the most typical risk asset, the other is called a safe-haven asset, yet their correlation coefficient reached a staggering 0.7.
Put these three sets of numbers together, and the conclusion is clear: gold is no longer on that logical chain. It rises with U.S. stocks, moves inversely to inflation, and exhibits the characteristics of a risk asset, not a safe-haven asset.
The Real Driving Force
Who transformed gold into this?
There has been a genuine, sustained demand: emerging market central banks. After the Russia-Ukraine war, central banks in Poland, Turkey, China, Brazil, and other countries began large-scale gold purchases. This is a real strategic reserve demand, not speculation, but a布局 for five to ten years. However, central bank buying is a slow process; it sets the floor but is not the main force that drove the price from $2,000 to $5,626.
The ones who pushed the price up were the institutions that followed the trend.
They saw central banks buying and took it as a signal; they heard "de-dollarization" and found the logic impeccable; they watched gold rise steadily and felt it was a loss not to get on board. The non-commercial net long positions, representing speculative heat,持续攀升, peaking at nearly twice the historical average.
But there’s another, less mentioned structural problem hidden here: most of these positions have no corresponding physical gold.
Today’s gold market is no longer the simple logic of you buying a gram and a gram being stored in a warehouse. COMEX futures, the London OTC market, gold ETFs, CFD contracts, crypto gold contracts... Various derivatives are stacked together, with the trading volume of paper gold often being dozens of times the annual global production of physical gold. Some estimates suggest that for every ounce of physical gold in the market, there may be dozens of paper claims. Most of these contracts are cash-settled and never touch the actual metal.
Futures contract margin ratios are typically only 6% to 8% of the contract value, meaning leverage of over ten times is the norm. The London OTC market is even more opaque, with unsecured gold positions opened between banks, essentially creating账面黄金 out of thin air.
This structure isn’t a problem in a bull market; leverage amplifies gains, and everyone is happy. But it埋下了一颗定时炸弹: once the price direction reverses, highly leveraged longs aren’t choosing to sell; they are forced to sell. Margin calls are insufficient, the system automatically liquidates, with no room for negotiation.
The形态 of a bubble always looks the same: genuine demand sets the foundation, a compelling story ignites it, chasing funds flood in, the derivatives market放大 the bets ten or twenty times, finally pushing the price to a level that genuine demand simply cannot support.
Gold, this time, is no exception.
War is the Fuse, Not the Culprit
War has come, so why did gold fall?
Because the war made one thing clear: rate cuts are off the table.
Oil prices broke $100, inflationary pressures reignited, and the probability of the Fed hiking rates has been priced into the market at 50%. The core logic for gold was betting on a low-interest-rate environment; low rates make holding non-yielding gold worthwhile. Once this logic flips, gold’s attractiveness is fundamentally severed.
The rising U.S. dollar index is a danger signal. Since the war broke out, the dollar index has反弹 nearly 2%. Global funds are flowing into the U.S. dollar. Gold, being a dollar-denominated asset, becomes more expensive for non-U.S. buyers.
Then those 380,000 long positions started to run.
But this time, the run wasn’t just a主动撤退; it was更多的是 forced liquidation. As the gold price began to fall, highly leveraged futures accounts first hit margin call levels, triggering forced liquidations. The selling orders pushed the price lower, which in turn triggered more liquidations, and new selling pressure pushed the price down again. This is a self-reinforcing spiral, on a completely different scale from retail panic selling.
Stocks and bonds fell simultaneously, forcing many investors to sell gold to raise cash; another group pulled money out of gold to bet on the energy sector. Ordinary closing, leveraged blow-ups, and liquidity withdrawal—three forces rushed towards the same exit simultaneously.
This scene is not unfamiliar. In March 2020, when the pandemic broke out, gold also flash-crashed. Back then, no one said gold’s logic was broken; everyone understood: in a liquidity crisis, there are no safe-haven assets, only cash. What you sell doesn’t matter; being able to convert it into cash matters. No matter how precious gold is, it’s still the thing you have to sell.
The underlying mechanism this time is no different from March 2020. Only this time, gold carries an extra layer—it is no longer a safe-haven asset; it is a risk asset stuffed with speculative positions and derivative leverage.
A liquidity crisis叠加 leverage liquidation, two knives falling together.
Two Scripts
What happens next? No one can give you a clear answer.
Those 380,000 long positions haven’t been fully closed. Today, with gold falling below $4,200, the price pattern suggests a bottom is approaching, but there’s no visible reason for a reversal.
If the war stops, there will be a反弹, but that would undoubtedly provide an opportunity for trapped longs to exit.
If the war continues, oil prices don’t retreat, inflation doesn’t retreat, rate hike expectations don’t retreat, gold will keep falling.
But history has also offered another script. During the oil price shock triggered by the Iranian Revolution in 1979, gold did not fall. It rose from $226 all the way to $524, eventually reaching its historical peak in early 1980. The logic then was: oil prices remained high for an extended period, stagflation expectations completely shattered U.S. dollar credibility, funds had nowhere else to go, and could only flood into gold. If this war drags on, inflation truly spirals out of control, and the Fed’s rate hikes can’t save the economy, it’s not impossible for this path to replay.
JPMorgan and Deutsche Bank still maintain year-end target prices of $6,000 to $6,300.
But one thing, regardless of the script, this round of暴跌 has proven: when a true liquidity crisis hits, no asset in the market is inherently immune. Be it gold or Bitcoin, no matter how compelling the stories told over the past two years, they all have to step aside in the face of the four words: "I need cash."
So now, gold stands at a real crossroads. On one side,泡沫出清, leverage liquidation concludes, speculative funds exit, and the gold price continues to探底. On the other side, the war drags into a chronic condition, stagflation expectations crush everything, and gold reclaims its position as the "final fortress."
Those quiet gold shops in Shuibei, those posts on Xiaohongshu asking "can I still break even?", and those who treat gold as a piggy bank—they didn’t actually buy the wrong asset.
They just believed in a grander narrative at the wrong time. Black swans always arrive悄然而至 when you are most excited.
The story isn’t over yet; it’s just that we don’t know yet whether it will be written as a tragedy or a sequel.
Twitter:https://twitter.com/BitpushNewsCN
Bitpush TG Discussion Group:https://t.me/BitPushCommunity
Bitpush TG Subscription: https://t.me/bitpush
