Spot Gold Drops Over 4.5% Intraday, Erasing Full-Year 2026 Gains

Questioning AI · Under Middle East Conflict, Gold Reverses Decline; What Role Does Federal Reserve Policy Play?

On March 23, spot gold fell more than 4.5% intraday, breaking below the $4,300 per ounce level, erasing the full-year gains of 2026, with year-to-date gains reaching nearly 30%.

Spot silver dropped over 6%, and the main contract of Shanghai silver futures declined nearly 11%.

Previously, Tian Lihui, a finance professor at Nankai University, pointed out in an interview with China National Radio Finance that the 1983 gold price plunge was caused by oil-producing countries selling gold to exchange for foreign currency amid falling oil prices, which was a supply-side shock. In contrast, this round of sharp decline was triggered by Fed expectations management leading to a sudden increase in the cost of holding gold, fundamentally a demand-side collapse. Additionally, the current gold market is dominated by derivatives such as ETFs, futures options, and swaps, with algorithmic trading and programmed stop-loss mechanisms further amplifying price volatility, causing short-term deviations from fundamentals that are much larger than in the past.

Tian Lihui emphasized that the commonality between the two major declines is that short-term gold pricing anchors are never risk sentiment, but rather actual interest rates and the dollar’s trend. This plunge is not only a correction of the overly crowded “rate cut trade” but also a rational return of the market to the real interest rate environment.

Yang Delong, Chief Economist at Qianhai Kaiyuan Fund, told China National Radio Finance that traditionally, geopolitical conflicts tend to boost investors’ risk aversion, and gold, as a classic safe-haven asset, usually attracts funds. However, during this Middle East conflict, the market has shown a completely different trend. The reasons include Iran blocking the Strait of Hormuz, causing international oil prices to surge sharply, reaching $119 per barrel at one point, which directly fueled global inflation expectations. Against this backdrop, the Fed was forced to delay rate cuts continuously, and expectations of no rate cuts this year gradually strengthened, which posed a significant negative impact on the non-yielding gold asset. Additionally, some institutions faced liquidity pressures due to declines in other asset prices and chose to sell gold holdings to raise funds. This passive “selling gold to rescue liquidity” behavior further intensified the downward momentum of gold prices.