Gold’s sharp declines ‘echo risk-off episodes seen in 2008 and 2020’ as liquidity dynamics dominate fundamentals
NEW YORK (March 23) After a week of major central bank meetings and escalating geopolitical tensions, gold prices have fallen to new lows for the year as bond yields move sharply higher, with the speed and breadth of market moves echo risk-off episodes seen in 2008 and 2020, when liquidity dynamics temporarily dominated fundamentals, according to the World Gold Council (WGC).
In their latest Weekly Markets Monitor, WGC analysts wrote that the drivers of gold’s ongoing weakness are currently being debated.
“Sharply higher real yields and expectations that policy rates will now rise in 2026, alongside de-leveraging and profit-taking, have all weighed on sentiment,” they noted. “The speed and breadth of market moves echo risk-off episodes seen in 2008 and 2020, when liquidity dynamics temporarily dominated fundamentals. The prospect of a prolonged Middle East conflict is concerning, as it raises humanitarian and geopolitical risks alongside the threat of economic stagnation and higher industrial input prices.”
“We’re in wait-and-see mode.”
With very little in the way of key economic data this week, the WGC expects the gold market will continue to take its cues from daily developments surrounding the Iran conflict.
“Any signs of the Strait of Hormuz reopening – alleviating energy disruptions - could rebuild investor confidence,” the analysts wrote. ‘On the flipside, prolonged disruptions could lead to intensifying expectations of rate hikes – though political constraints and the mounting debt burden in the US may limit the Fed’s room to raise. Stagflation risks –which gold has historically responded well to – may rise in this scenario. But for now, liquidity concerns appear to dominate market action.”
“Although short-term shocks may affect gold’s near-term trajectory, the broader forces of multi-polarisation, rising geopolitical fragmentation, and persistent sovereign debt concerns should continue to support gold’s strategic role,” they added.
Turning to the technical picture, WGC analysts pointed out that gold’s aggressive further fall below the early February spike low at US$4,403/oz has the yellow metal setting fresh annual lows. “This is seen to add further momentum to the sell-off with the next key support seen at US$4,090/oz-US$4,066/oz, which includes the 38.2% retracement of the 2022/2025 uptrend and long-term 200-day average,” they noted. “With net long positioning already seen low on a relative basis, our bias would be to look for an attempt to find a floor here.”
“Should weakness directly extend and a sustained close below U$4,090/oz-US$4,066/oz emerge this would warn of yet further weakness with support then seen next at the October 2025 low at US$3,887/oz,” they added. “Resistance is seen initially at US$4,736/oz ahead of US$4,844oz, with the immediate risk seen staying lower whilst below the 13- day exponential and 55-day simple moving averages at US$4,922/oz-US$4,932oz.”
Gold has staged a strong recovery from the earlier low below $4,100 per ounce, and after bumping up against near-term resistance at $4,500, the yellow metal is fighting to claim the $4,400 per ounce level in early afternoon trading on Monday.
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