The same factors that pushed gold to record highs in 2022–2025 are now weighing on prices in 2026. The precious metal has shifted from a safe-haven asset to a source of liquidity for investors, putting it under bearish pressure. Let’s discuss it and make a trading plan for XAU/USD.
The article covers the following subjects:
Major Takeaways
- Some central banks have started selling gold.
- The precious metal helps cover margin calls.
- XAU/USD is turning into a risk asset.
- Short positions opened from $5,200 and below should be held.
Weekly Fundamental Forecast for Gold
For the past seven months, gold has shown consistent gains. However, the conflict in the Middle East has dealt a heavy blow to the precious metal. March may become the worst month in its history in value terms. At the same time, XAU/USD‘s decline of more than 20% from its record highs signals a move into bear territory. There is a key reason — gold’s own strengths have turned against it.
The global economy has entered this period of conflict in Iran with over $100 trillion in government debt and significantly higher central bank interest rates than after the pandemic. This limits governments’ ability to increase spending to support their economies. Previously, high debt levels and the resulting weakness of fiat currencies were key drivers supporting gold. Now, this same factor is working against it.
Gold Reserves
Source: Bloomberg.
There is no money. There is no money at all. Time to sell gold. This is exactly how governments and central banks operate. It is no surprise that Poland plans to sell bullion to support rising defense spending, Turkey is doing the same to support the collapsing lira, and other countries are selling gold to offset the negative effects of the energy crisis. Over the past few years, central bank purchases of the precious metal have been another key driver supporting XAU/USD. Now, like many other factors, this one is working against it.
Instead of acting as a safe haven during geopolitical shocks, gold has turned into a source of liquidity. It can be quickly sold to support the economy. Or to avoid margin calls on equities and bonds. Investors are taking profits on long positions in XAU/USD opened in previous years to raise cash and support their positions in securities. As a result, volatility in the precious metal is increasing, and it is becoming a risk asset.
Gold Volatility Dynamics
Source: Financial Times.
This is not surprising. The same pattern was observed during the 2008 global financial crisis and the 2020 pandemic. Gold declined alongside stock indices as investors needed liquidity. The precious metal is relatively easy to sell.
Where is the bottom for XAU/USD? Gold will be saved by extremes. Either a quick resolution of the Middle East conflict, which would support gains in the S&P 500 and weaken the US dollar. Or a significant escalation, which would increase recession risks and bring back expectations of Federal Reserve rate cuts. In intermediate scenarios, the precious metal is likely to continue declining.
Weekly Trading Plan for XAU/USD
As long as investors remain focused on stagflation rather than recession, it makes sense to continue selling XAU/USD. Short positions in gold opened at $5,200, $5,000, and $4,730 per ounce remain valid. They should be held and increased on pullbacks.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of XAUUSD in real time mode
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