Gold is acting like an asset in a liquidity squeeze – not “failing”

One of the stranger narratives making the rounds lately is that gold somehow “failed” because it did not rise in a straight line during a geopolitical shock.

That is not how markets work in real life.

Reuters reported that gold fell nearly 4% in the days after the first U.S.-Israeli strikes on Iran, even though many expected a classic safe-haven rally. Their explanation is worth noting: when markets are hit by a sudden shock, large investors often sell whatever has gone up the most in order to raise cash quickly. In this case, gold had been one of the most crowded trades in global markets. Reuters noted that gold exchange-traded products had already absorbed huge inflows, and gold was trading nearly 30% above its 200-day average before the conflict began. In other words, the early selling looked more like mechanical de-risking than a verdict on gold’s long-term role.1

That matters. Here's why...

When people hear “safe haven,” they often imagine an asset that rises every hour a crisis deepens. But in a true liquidity event, investors do not always sell what they dislike. They often sell what they can. Broader financial reporting this week described exactly that sort of environment: thinner liquidity, wider spreads, more volatility and rising pressure to raise cash fast.

That does not make gold broken. If anything, it helps explain why gold can drop sharply in the short run and still remain attractive over a longer stretch.

Sprott made a similar case in its recent commentary, arguing that while gold has seen violent short-term selloffs, the broader drivers behind the move higher have not disappeared. Their February update noted that gold recovered quickly from a sharp late-January plunge and still closed the month above $5,000, not far from its prior high.2

My view is simple: a short-term selloff during a scramble for liquidity is not the same thing as a broken long-term case. Those are two very different stories, and too many headlines blur them together.

France’s $15 billion gold gain is a reminder of what central banks already know

The second story is easier to miss, but it may be the more revealing one.

Reuters reported on March 24 that the Bank of France booked nearly 13 billion euros – about $15.1 billion – in one-off capital gains from upgrading part of its gold reserves while prices were high. This did not mean France suddenly made a speculative bet on gold. The bank sold older, non-standard bars and replaced them with compliant bars, while keeping the overall size of its gold reserves roughly unchanged at about 2,437 tons.

That distinction matters because it makes the story more credible, not less.

France was not “trading gold.” It was maintaining a strategic reserve – and high gold prices turned a technical reserve-management operation into a major financial gain. Reuters reported that the operation helped swing the central bank from a net loss in 2024 to a net profit in 2025.

To me, this is the overlooked part of the story: gold did not have to do anything exotic here. It simply had to hold value over time.

That is the lesson ordinary savers often miss when the conversation gets swallowed by day-to-day price chatter. People are encouraged to obsess over short-term pullbacks, but central banks continue to treat gold as a serious reserve asset. France’s experience is a good example of why. Gold can provide liquidity when needed, and it can also preserve purchasing power long enough for those gains to become obvious.

That does not mean prices only move in one direction. They do not. But it does mean the long-term usefulness of physical gold is easier to see when you step back from the weekly noise.

If 2020 conditions are here, is gold getting ready for a similarly massive jump?

DailyMail's latest piece on supposed gold losses sticks out for more than just bad reasoning.

Enclosed within the "don't buy gold" article is a link to New South Wales government official saying that the gas situation in Australia warrants a 2020-style intervention by the government. 

This is more than tangentially related to the Sprott piece above, which also went deep into 2020 conditions and why gold's current price drops are a consequence of the same. As Sprott noted there, gold was sold off right away along with everything else during a global liquidity squeeze.

As you might imagine, the media was riddled with stories on how gold seems to be failing in its role as a safe haven.

Then, as soon as the panic subsided, gold resumed what would be a historic run that has arguably been going for six years now. (Sprott uses 2008 as yet another example of this exact kind of price action.)

The bottom line is, we could be in one of the biggest instances of gold price mimicking a rocket launch in modern history.

But as I've said, nobody seems to want to talk about that. Instead pieces like these dominate the mainstream media landscape.

The article specifically focusing on the supposed "losses" that would have materialized from buying gold around $5,000 now that it's $4,500. But those gold buyers haven't booked any losses, not unless they sold. If, like Birch Gold customers, they bought for the long-term, the long-term outlook for gold price remains just as promising as it did three months ago.

An investor with a timeline of a decade, which is how gold should be considered, should tune out daily price volatility. They are buying for long-term wealth preservation. This and similar articles are focused on trading and speculation, not long-term wealth preservation. I only talk about them because I want to inform readers just how common this sort of article is. 

So despite all the spinning and attempts of dissuading, those Australians still managed to get their hands on an asset that won't evaporate into thin air. And I suspect that should gold leap to $6,000 in the near term as many are projecting, the media won't be patting them on the back over their prudence.

Instead, we'll probably have to hear how gold price has gone "too high, too fast, for undiscernible reasons." 

In other words, the exact same story we've heard over and over for the last three years. One that's easily debunked by a quick look at the forces that drive gold's price.

 

 

Peter Reagan is a financial market strategist at Birch Gold Group. As the Precious Metal IRA Specialists, Birch Gold helps Americans protect their retirement savings with physical gold and silver.

 

www.birchgold.com