Gold suffered its biggest weekly drop in 43 years. Why did safe-haven assets fall first?

March 23rd, Black Monday. Gold, silver, US stocks, European stocks, copper, aluminum, zinc, tin, Bitcoin—all fell. Not just a little, but the kind of fall that makes you wonder if your account has been hacked. The most outrageous was gold. The Middle East was at war, the Strait of Hormuz was blocked, oil prices surged to $114, and the whole world was calling for "World War III"—according to textbooks, gold should have skyrocketed. But what happened? Spot gold plummeted 10.24% in a single week, falling below $4,500, marking its worst performance in 43 years. On March 23rd alone, it fell to around $4,100, a daily drop of over 6%. The last time a crash of this magnitude occurred was in 1983.

Safe-haven assets collapsed at the most opportune time. This isn't a joke; it's the reality of March 2026.

A single fuse ignited the entire chain.

The story begins on February 28th.

On that day, the United States and Israel launched a joint military strike against Iran codenamed "Operation Epic Fury." The objective was clear: to destroy Iran's missile and nuclear capabilities. On the first day of the operation, the US-Israeli coalition killed approximately 40 high-ranking Iranian officials, including Supreme Leader Khamenei, through precision-guided strikes, crippling Iran's command system within hours.

But Iran's retaliation was unconventional—they chose an action even more lethal than launching missiles: blocking the Strait of Hormuz.

But Iran's retaliation was not conventional—they chose an action even more lethal than launching missiles: blocking the Strait of Hormuz.

How important is this strait? 20%-25% of the world's ocean-going oil passes through here. Blocking it is tantamount to severing the global economy's lifeline. The Iranian Revolutionary Guard began intercepting ships on February 28th and completely blocked the waterway by the second week of March, trapping large quantities of crude oil in the Persian Gulf. Simultaneously, Iran launched retaliatory operations codenamed "True Promises-4," firing numerous missiles and drones at six countries, including Israel, the UAE, Saudi Arabia, and Qatar. Dubai International Airport was bombed, and smoke rose near the Burj Khalifa. Analysts warn that if this crisis drags on until mid-year, global food security will face severe challenges. Brent crude oil surged to $114. The dream of interest rate cuts has been shattered, and the nightmare of interest rate hikes has arrived. The destructive power of soaring oil prices lies not in the price of oil itself, but in the fact that it ignited a term no one wants to face: stagflation. Before the crisis, global investors were still immersed in the dream of "inflation peaking and central banks cutting interest rates." However, the February PPI data came out, showing a year-on-year increase of 3.4% and a month-on-month increase of 0.7%, far exceeding expectations. Oil, from the supply side, pulled inflation back. On March 18, the Federal Reserve's FOMC meeting maintained interest rates at 3.50%-3.75%, but the signals it released were even stronger than a rate hike: PCE inflation expectations were raised from 2.4% to 2.7%, and the dot plot showed that many officials believed that further interest rate cuts were not advisable this year, significantly cooling market expectations for further easing. Market expectations for interest rate cuts this year quickly faded, while tightening expectations reflected in interest rate futures clearly intensified. Within a week, the market went from expecting "two rate cuts this year" to "potential rate hikes." This 180-degree reversal of expectations was the real trigger for the market crash on March 23. Gold: From "King of Safe Haven" to "Last ATM" Returning to the core question: With the war raging so fiercely, why did gold prices fall instead of rise? Simply put, there are three reasons. First, interest rates have hammered gold. Gold doesn't earn interest; the only return on holding it is price appreciation. When the 10-year US Treasury yield surged 13 basis points to around 4.38% on March 20, reaching a new high since July 2025, coupled with the US dollar index briefly breaking through 100 in mid-March, the opportunity cost of holding gold skyrocketed. Market attention shifted from "fear of war" to "fear of interest rate hikes"—when the allure of yields outweighed safe-haven demand, gold was the first to be abandoned. Secondly, the script of 1983 is playing out again. In March 1983, the oil price crash led to a cash flow crisis for OPEC countries, forcing them to sell their gold reserves for cash, causing gold prices to plummet by more than $105 in a week. 43 years later, the plot has changed: this time oil prices are rising, but the problems for Saudi Arabia and the UAE are even more bizarre—they can't sell their oil. With the Strait of Hormuz blocked, oil is stuck in the Persian Gulf and can't get out, resulting in almost zero oil export revenue. But military spending continues. The US military alone spent $11.3 billion in the first six days. These countries sitting on gold mines are now forced to convert their gold into cash to stay afloat. The selling pressure at the sovereign level is invisible to retail investors, but it acts like a ceiling, firmly suppressing gold prices. Third, gold has become everyone's "cash cow." This is the most brutal layer. Gold rose 64% in 2025, making it one of the best-performing asset classes over the past year. When the stock market, bond market, and private equity lending all collapsed on March 23, with margin calls piling up, institutional investors didn't have many readily convertible assets—gold was that "liquidity reservoir." Profitable positions were sold first, because they could be sold easily. This is the fate of gold: in normal times, it is the crown of safe haven; in a true liquidity crisis, it is the first thing to be taken off and pawned. The $2 trillion private equity lending blizzard has devastated the gold price crash. Behind it lies an even bigger bombshell: private equity lending. Over the past few years, approximately $2 trillion in private equity lending has flooded into the technology sector, with technology and software being a major investment target. The logic is simple—software is synonymous with "asset-light, high-growth," making lending to them a sure-fire way to profit. Until AI arrived. Meta spends $135 billion a year on AI infrastructure, but what about the profits? Still on the way. As Wall Street began to question the payback period for AI, software company valuations collapsed, and collateral for private lending shrank. JPMorgan Chase directly lowered its valuation of software loans and tightened lending limits. The panic spread to asset management giants. Blackstone's flagship fund, BCRED, faced investor demands to redeem $3.8 billion, representing 7.9% of its total size, far exceeding the quarterly redemption cap of 5%. Even more ruthless was Blue Owl, which announced a permanent suspension of regular redemptions—in layman's terms: money in, no going out. When the door to private lending was welded shut, money could only jump out through the windows of the public market. Gold, blue-chip stocks, and everything with liquidity became scapegoats. Bitcoin: $68,000, stuck in the middle. The performance of the crypto market in this storm can only be described as "awkward." Bitcoin fluctuated around $68,000 on March 23rd. While it outperformed gold throughout the week, the narrative of "digital gold" completely failed this week. As liquidity squeezes spread from traditional financial markets, Bitcoin, like all risky assets, was sold off. It didn't become a safe haven, nor an inflation hedge; it simply... fell along with the market. Interestingly, the root causes of this crash—war, oil prices, the Federal Reserve—were not directly related to the crypto industry. But in the face of genuine systemic risk, the correlation of all asset classes approaches 1. There are no "uncorrelated assets," only assets that "haven't reached extreme situations yet." Summary: The GDP forecast for the fourth quarter of 2025 has been revised down to 0.7%, and inflation expectations have spiraled out of control again due to soaring oil prices. The Federal Reserve is caught on a tightrope between controlling inflation and preventing recession. UBS says the long-term logic for gold remains intact. Perhaps. But in the short term, as long as the Strait of Hormuz remains closed and the Federal Reserve doesn't soften its stance, gold will struggle to escape its "cash cow" status. March 2026 will teach the market one thing: in the face of a real crisis, there are no safe-haven assets, only liquidity. And liquidity never acts on emotion.