Gold has not lost its safe-haven properties; rather, it is now being sold off.
2026-03-26 01:29:46
Amidst the escalating conflict in the Middle East and heightened volatility in global financial markets, the pullback in gold prices has sparked widespread skepticism. However, research from Standard Chartered argues that this decline does not signify a weakening of gold's safe-haven appeal; rather, it highlights its core function in extreme environments—providing liquidity.
Suki Cooper, Global Head of Commodities Research at Standard Chartered, points out that when market uncertainty surges, investors' top priority is not returns, but cash. Gold, as a large and highly liquid asset, often becomes the most direct tool for liquidation. Therefore, the sell-off of gold is essentially a "financing activity," rather than a sign of a bearish trend.
Why was this round of decline more severe? Structural problems have emerged.
Although "selling gold for liquidity" is not a new phenomenon, the speed of this round of adjustment is significantly faster than the historical average, which reflects the fragility of the market structure.
On the one hand, geopolitical conflicts led to a sudden surge in liquidity demand, forcing funds to quickly withdraw from some assets; on the other hand, the gold market had already accumulated a large number of long positions before the correction occurred. Data shows that short positions were at a five-year low at the time, indicating a highly consistent bullish market sentiment.
The result of this "crowded trading" is that once the price retraces, it is very easy to trigger concentrated liquidation, thereby amplifying the decline and making the price adjustment exhibit characteristics similar to a "stampede".
The real short-term variable: ETF holding pressure
Compared to the macro narrative, what is more decisive for gold at present is the potential selling pressure generated by ETF holdings.
According to Standard Chartered's calculations, when gold prices were around $4,500 per ounce, approximately 83 tons of gold ETF holdings were already at a loss; if prices fell back to $4,000, this figure would expand to 268 tons. Since the beginning of 2025, the total holdings established above $4,000 have reached 430 tons.
Under the assumption of "last in, first out," more than 100 tons of open positions are currently at risk of stop-loss, and if prices continue to decline, the potential scale of passive selling could expand rapidly. This means that the dominant factor in the short-term trend of gold is shifting from macroeconomic logic to "position clearing."
Technical analysis: Support has emerged, but the bottom has not been confirmed.
From a price movement perspective, gold has found some support near the 200-day moving average and rebounded from the $4,100 area to around $4,577. However, this rebound is more likely a technical correction than a trend reversal.
Cooper believes the market is still in the "bottom-finding" phase. Until liquidity pressures and position adjustments are fully released, prices may remain volatile or even face further downward pressure.
Potential Reversal Mechanism: The Overlooked Short Covering
Despite short-term pressure, new upward momentum has begun to accumulate in the market, with the most crucial factor being short covering.
Data shows that during the previous price surge, short positions in the gold market decreased significantly, especially before the conflict, falling below the five-year average. This means that once prices stabilize or rebound, existing short positions may be forced to cover, creating "passive buying" and pushing prices higher.
This kind of rise driven by position structure often comes quickly and is explosive.
Historical Mirror: The Golden Logic in a Stagflation Environment
Cooper drew a parallel between the current situation and the oil crisis of the 1970s. At that time, soaring energy prices triggered inflation, while economic growth stagnated, creating a classic stagflation scenario.
Against this backdrop, gold, as a store of value, has been repriced, leading to a significant price increase. Currently, the world also faces challenges such as energy shocks, inflationary uncertainty, and unclear policy paths, which ensures that the medium- to long-term fundamentals for gold remain sound.
Conclusion: The problem lies not in the trend, but in the timing.
Overall, the core issue for gold right now is not a trend reversal, but rather a temporary misalignment of timing.
In the short term, liquidity demand and ETF holding pressure may still lead to further volatility; in the medium term, short covering may become an important driver of price rebound; and from a longer-term perspective, inflation risks and geopolitical uncertainties still form the foundation for gold's rise.
In other words, gold has not lost its safe-haven function; rather, it functions in a different way—it can be quickly converted into cash when the market needs it most. It is precisely this "ability to be sold" that makes it one of the most fundamental safe-haven assets in the global financial system.
Suki Cooper, Global Head of Commodities Research at Standard Chartered, points out that when market uncertainty surges, investors' top priority is not returns, but cash. Gold, as a large and highly liquid asset, often becomes the most direct tool for liquidation. Therefore, the sell-off of gold is essentially a "financing activity," rather than a sign of a bearish trend.
Why was this round of decline more severe? Structural problems have emerged.
Although "selling gold for liquidity" is not a new phenomenon, the speed of this round of adjustment is significantly faster than the historical average, which reflects the fragility of the market structure.
On the one hand, geopolitical conflicts led to a sudden surge in liquidity demand, forcing funds to quickly withdraw from some assets; on the other hand, the gold market had already accumulated a large number of long positions before the correction occurred. Data shows that short positions were at a five-year low at the time, indicating a highly consistent bullish market sentiment.
The result of this "crowded trading" is that once the price retraces, it is very easy to trigger concentrated liquidation, thereby amplifying the decline and making the price adjustment exhibit characteristics similar to a "stampede".
The real short-term variable: ETF holding pressure
Compared to the macro narrative, what is more decisive for gold at present is the potential selling pressure generated by ETF holdings.
According to Standard Chartered's calculations, when gold prices were around $4,500 per ounce, approximately 83 tons of gold ETF holdings were already at a loss; if prices fell back to $4,000, this figure would expand to 268 tons. Since the beginning of 2025, the total holdings established above $4,000 have reached 430 tons.
Under the assumption of "last in, first out," more than 100 tons of open positions are currently at risk of stop-loss, and if prices continue to decline, the potential scale of passive selling could expand rapidly. This means that the dominant factor in the short-term trend of gold is shifting from macroeconomic logic to "position clearing."
Technical analysis: Support has emerged, but the bottom has not been confirmed.
From a price movement perspective, gold has found some support near the 200-day moving average and rebounded from the $4,100 area to around $4,577. However, this rebound is more likely a technical correction than a trend reversal.
Cooper believes the market is still in the "bottom-finding" phase. Until liquidity pressures and position adjustments are fully released, prices may remain volatile or even face further downward pressure.
Potential Reversal Mechanism: The Overlooked Short Covering
Despite short-term pressure, new upward momentum has begun to accumulate in the market, with the most crucial factor being short covering.
Data shows that during the previous price surge, short positions in the gold market decreased significantly, especially before the conflict, falling below the five-year average. This means that once prices stabilize or rebound, existing short positions may be forced to cover, creating "passive buying" and pushing prices higher.
This kind of rise driven by position structure often comes quickly and is explosive.
Historical Mirror: The Golden Logic in a Stagflation Environment
Cooper drew a parallel between the current situation and the oil crisis of the 1970s. At that time, soaring energy prices triggered inflation, while economic growth stagnated, creating a classic stagflation scenario.
Against this backdrop, gold, as a store of value, has been repriced, leading to a significant price increase. Currently, the world also faces challenges such as energy shocks, inflationary uncertainty, and unclear policy paths, which ensures that the medium- to long-term fundamentals for gold remain sound.
Conclusion: The problem lies not in the trend, but in the timing.
Overall, the core issue for gold right now is not a trend reversal, but rather a temporary misalignment of timing.
In the short term, liquidity demand and ETF holding pressure may still lead to further volatility; in the medium term, short covering may become an important driver of price rebound; and from a longer-term perspective, inflation risks and geopolitical uncertainties still form the foundation for gold's rise.
In other words, gold has not lost its safe-haven function; rather, it functions in a different way—it can be quickly converted into cash when the market needs it most. It is precisely this "ability to be sold" that makes it one of the most fundamental safe-haven assets in the global financial system.
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