Gold’s sharp drop mirrors 2008 and 2020 crises as liquidity drives the market – World Gold Council

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 surge sharply, with the speed and breadth of market moves reflecting 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 noted that the factors driving gold’s ongoing weakness are still under debate.

“Sharply higher real yields and expectations that policy rates will rise in 2026, alongside de-leveraging and profit-taking, have all weighed on sentiment. 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,” they said.

“We are in wait-and-see mode.”

With very little key economic data scheduled this week, WGC expects the gold market to continue reacting to daily developments surrounding the Iran conflict.

“Any signs of the Strait of Hormuz reopening – alleviating energy disruptions – could rebuild investor confidence. On the other hand, prolonged disruptions could increase expectations of rate hikes – though political constraints and the mounting U.S. debt may limit the Fed’s room to raise rates. Stagflation risks – which gold has historically responded well to – may rise in this scenario. But for now, liquidity concerns appear to dominate market activity,” the analysts added.

“Although short-term shocks may affect gold’s near-term trajectory, broader forces such as multipolarity, rising geopolitical fragmentation, and persistent sovereign debt concerns should continue to support gold’s strategic role.”

From a technical perspective, WGC analysts highlighted that gold’s aggressive drop below the early February spike at $4,403/oz has set fresh annual lows. “This is seen to add further momentum to the sell-off, with the next key support at $4,090–$4,066/oz, which includes the 38.2% retracement of the 2022–2025 uptrend and the long-term 200-day moving average. With net long positions already low on a relative basis, our bias would be to look for an attempt to find a floor here.”

“Should weakness continue and a sustained close below $4,090–$4,066/oz occur, this would signal further downside, with the next support at the October 2025 low of $3,887/oz. Resistance is initially seen at $4,736/oz, followed by $4,844/oz, with immediate risk staying lower as long as gold remains below the 13-day exponential and 55-day simple moving averages at $4,922–$4,932/oz.”

Gold has staged a strong recovery from the earlier low below $4,100/oz, and after testing near-term resistance at $4,500, the metal is attempting to reclaim the $4,400/oz level in early afternoon trading on Monday.