Gold Posts Largest Weekly Decline in 43 Years, Why Did Safe-Haven Assets Fall First?

Written by Cathy

March 23rd, Black Monday.

Gold, silver, US stocks, European stocks, copper, aluminum, zinc, tin, Bitcoin—all fell. Not a little, but the kind of drop that makes you doubt if your account has been hacked.

The most outrageous was gold.

Middle East at war, the Strait of Hormuz blocked, oil prices soaring to $114—everyone was shouting “World War III”—according to textbooks, gold should have surged. But what happened? Spot gold plummeted 10.24% in a week, breaking below $4,500, the worst in 43 years. On March 23rd, it even dropped near $4,100, with a daily decline of over 6%. The last time such a crash occurred was in 1983.

Safe-haven assets collapsed when they were needed most. This is not a joke; this is the reality of March 2026.

01 A single fuse, blew up the entire chain

The story begins on February 28th.

That day, the US and Israel launched a joint military strike against Iran, codenamed “Operation Epic Fury.” The goal was clear: destroy Iran’s missile and nuclear capabilities. On the first day, the US-Israel coalition used precision-guided strikes to kill about 40 high-ranking Iranian officials, including Supreme Leader Khamenei, crippling Iran’s command system within hours.

But Iran’s counterattack was not conventional—they chose a more deadly move than launching missiles: blocking the Strait of Hormuz.

How important is this strait? About 20-25% of global oil shipments pass through it. Block it, and you choke the global economy’s air supply. Iran’s Revolutionary Guard began intercepting ships from February 28th, and by the second week of March, they had completely sealed the route, trapping large amounts of crude oil in the Persian Gulf.

Meanwhile, Iran launched a retaliatory operation codenamed “True Promise-4,” firing numerous missiles and drones at Israel, the UAE, Saudi Arabia, Qatar, and other countries. Dubai International Airport was hit, and smoke rose near the Burj Khalifa. Analysts warned that if this crisis dragged into mid-year, global food security would face severe challenges.

Brent crude oil shot directly to $114.

02 Rate cut dreams shattered, the nightmare of rate hikes begins

The destructive power of soaring oil prices isn’t just in the price itself but in igniting a term everyone dreads: stagflation.

Before the war, global investors were still dreaming of “peaking inflation and central banks cutting rates.” But then, February’s PPI data came out—up 3.4% year-over-year, 0.7% month-over-month, far exceeding expectations. Oil’s supply-side shock reignited inflation.

On March 18th, the Federal Reserve’s FOMC meeting kept rates steady at 3.50%-3.75%, but the signals were harsher than a rate hike: PCE inflation expectations were raised from 2.4% to 2.7%, and the dot plot showed many officials believed rate cuts this year were inappropriate. Market expectations for further easing cooled significantly.

Expectations of rate cuts within the year quickly faded, and interest rate futures reflected a clear shift toward tightening.

Within a week, the market shifted from “two rate cuts this year” to “possibly more rate hikes.” This 180-degree reversal was the true trigger for the full-scale crash on March 23rd.

03 Gold: From “King of Safe Havens” to “Last Cash Machine”

Back to the core question: with such fierce fighting, why did gold not rise but fall?

Simply put, three reasons.

First, interest rates crushed gold.

Gold doesn’t generate income; its only return is price appreciation. When the 10-year US Treasury yield surged 13 basis points to around 4.38% on March 20th—hitting a high since July 2025—and the dollar index briefly broke 100 in mid-March, the opportunity cost of holding gold skyrocketed. Market focus shifted from “worrying about war” to “worrying about rate hikes”—when yields become more attractive than safe-haven demand, gold is the first to be abandoned.

Second, the 1983 script is playing out again.

In March 1983, soaring oil prices drained OPEC countries’ cash flows, forcing them to sell gold reserves for cash, causing gold prices to plunge over $105 in a week. Forty-three years later, the story has a different shell: this time, oil prices are rising, but Saudi Arabia and the UAE face a bizarre problem—they can’t sell their oil. The Strait of Hormuz is blocked, oil is stuck in the Persian Gulf, and export revenues are nearly zero.

But military spending continues. The US alone spent $11.3 billion in the first six days. Countries sitting on gold mines now have to turn gold into cash to keep operating. Sovereign-level selling pressure is invisible to retail investors but acts like a ceiling, firmly suppressing gold prices.

Third, gold has become everyone’s “cash machine.”

This is the cruelest layer. In 2025, gold rose 64%, making it one of the best-performing assets of the year. When the stock, bond, and private credit markets all collapsed on March 23rd, with margin calls flooding in, there weren’t many assets that could be quickly liquidated—gold was the “liquidity reservoir.” Profitable positions were sold first because they could be sold.

This is gold’s fate: in normal times, it’s the crown of safe-haven assets; in a liquidity crisis, it’s the first pawned.

04 $2 trillion private credit, exploded

Gold’s plunge isn’t an isolated event. Behind it, another bigger bomb is ticking: private credit.

In recent years, about $2 trillion of private credit funds flooded into the tech sector, with software and tech being major targets. The logic was simple—software is “light assets, high growth,” lending to them is risk-free.

Until AI arrived.

Meta spends $135 billion annually on AI infrastructure, but what about profits? Still on the way. As Wall Street began questioning AI’s return cycle, software valuations started collapsing, and private credit collateral shrank. JPMorgan directly downgraded the valuation of software loans and tightened lending.

Panic spread to asset management giants. Blackstone’s flagship fund BCRED was asked by investors to redeem $3.8 billion, accounting for 7.9% of total assets—far exceeding the 5% quarterly redemption limit. Even more severe, Blue Owl announced a permanent suspension of regular redemptions—literally, “money in, no way out.”

When private credit doors are welded shut, money can only jump out through the open window of the public markets. Gold, blue-chip stocks, all liquid assets—become scapegoats.

05 Bitcoin: $68,000, stuck in the middle

The crypto market’s performance in this storm can only be described as “awkward.”

Bitcoin fluctuated around $68,000 on March 23rd. Although it outperformed gold over the week, the narrative of “digital gold” completely failed this week. When liquidity crunches hit traditional financial markets, Bitcoin and all risk assets are sold off together. It didn’t become a safe haven or an inflation hedge; it just… fell along with everything else.

Interestingly, the root causes of this crash—war, oil prices, Federal Reserve—are not directly related to crypto. But in the face of systemic risk, all asset classes tend to correlate near 1.

There are no “non-correlated assets,” only assets that haven’t yet reached an extreme.

06 Summary

By Q4 2025, GDP has been revised down to 0.7%, and inflation expectations have spiraled out of control again due to soaring oil prices. The Fed is caught between “controlling inflation” and “preventing recession.”

UBS says the long-term logic of gold remains intact. Maybe. But in the short term, as long as the Strait of Hormuz remains blocked and the Fed doesn’t loosen, gold will struggle to escape its “cash machine” fate.

March 2026 teaches the market one thing: in a real crisis, there are no safe assets—only liquidity. And liquidity never cares about feelings.