Gold Approaches "Ten Consecutive Declines," Liquidity Squeeze to Dominate Short-Term Trends

Mars Finance News: On March 24, amid escalating tensions in the Middle East, a surge in energy prices has triggered a chain reaction that is suppressing the precious metals market. Spot gold temporarily fell about 2% during trading, and although it briefly rebounded above $4,400 before the European session, it remains in a weak zone. If it closes lower again today, it will mark the tenth consecutive trading day of decline. Market analysis indicates that the current downward trend in gold is not due to a failure of traditional logic but is primarily driven by “liquidity squeeze.” As oil prices rise and boost inflation expectations, investors are forced to sell high-liquidity assets, including gold, to cover losses in stocks, bonds, and other assets or to meet margin calls. This behavior of “selling quality assets to fill gaps” is common in extreme volatility environments. Previously, Trump announced a delay in strikes on Iran’s power grid, providing a brief support to gold prices. However, Iran later issued tough signals, combined with news that U.S. allies might become involved in the conflict, further increasing market uncertainty. Additionally, disruptions in shipping through the Strait of Hormuz have amplified energy supply risks. Institutional views generally believe that gold will remain under pressure in the short term. Standard Chartered Bank noted that a 4 to 6-week correction after intense market volatility is not uncommon; Swiss Re analysis states that during major crises, gold is often used as a “cash machine” for quick liquidity. Historical experience shows that whether during the 2008 financial crisis or the early stages of the Russia-Ukraine conflict in 2022, gold experienced similar phased corrections as risk aversion increased. Despite short-term price pressures, analysts generally believe that the long-term fundamentals supporting gold—including geopolitical risks, global inflation pressures, and continued central bank purchases—have not fundamentally changed.