Gold’s sharp declines ‘echo risk-off episodes seen in 2008 and 2020’ as liquidity dynamics dominate fundamentals – World Gold Council

Gold prices have plunged to fresh annual lows around $4,390/oz, driven by a sharp rise in real yields and expectations of policy rate increases in 2026, according to the World Gold Council's (WGC) latest Weekly Markets Monitor. The rapid market moves resemble past risk-off episodes in 2008 and 2020, where liquidity dynamics briefly overshadowed fundamentals. The ongoing Middle East conflict and geopolitical tensions add to uncertainty, with gold trading below key technical supports at $4,403/oz and eyeing further support in the $4,090-$4,066/oz range, near the 200-day average. WGC analysts highlight that while short-term shocks and liquidity concerns dominate, the broader multi-polar geopolitical landscape and rising sovereign debt issues should uphold gold's strategic appeal over the medium term. Market participants remain cautious, awaiting clarity on the Strait of Hormuz and energy supply disruptions, which could influence inflation and Fed rate hike expectations. Technical resistance clusters near $4,736-$4,844/oz and key moving averages at around $4,920-$4,930/oz suggest tactical levels for traders. Near-term risks include further declines if gold fails to hold the $4,090-$4,066 level, potentially testing the October 2025 low near $3,887/oz. Conversely, any easing in Middle East tensions or energy supply restoration could prompt a rebound. Traders should monitor geopolitical developments closely as they will likely continue to dictate gold's direction in the absence of major economic data this week.