Why is Gold CRASHING? (During a War?)

High-level takeaway

• Gold experienced its largest weekly drop since 1983 (presenter cites a ~9–9.9% one‑week fall; also described as the “worst week in 43 years”).
• The decline is primarily a paper‑market event (futures, leveraged ETFs, algorithmic selling, margin calls). Physical demand—Asian central banks, Chinese/eastern buyers, Shanghai premiums and COMEX withdrawals—remains strong.
• Principal chain of drivers: Middle East war → oil supply shock → higher inflation expectations → higher bond yields and stronger USD → algorithmic/leveraged forced selling in paper gold → sharp paper price fall. The presenter likened the dynamics to the 1983 episode (sovereign/commodity‑related selling of gold).

Assets, instruments, exchanges and sectors mentioned

• Gold (physical and futures/paper)
• Silver
• Leveraged gold ETFs (2x, 3x)
• Unleveraged/physically backed gold ETFs
• COMEX (futures exchange)
• US dollar index (DXY)
• US 10‑year Treasury yield and sovereign bonds
• Oil / energy (Strait of Hormuz disruption noted)
• Asian central banks, Chinese investors, Shanghai market
• Hedge fund algorithmic/systematic traders
• Goldman Sachs (cited oil-price scenarios)
• Sectors: commodities (precious metals, energy), macro rates/currencies

Key numbers, timelines and quotes

• “Worst weekly collapse since 1983” / “worst week in 43 years.”
• One‑session moves: gold down ~8% in a session; silver down ~17% in a session; another session gold −7% (March).
• One‑week drop noted as ~9.4%–9.9%.
• 2025 year‑to‑date performance referenced: gold up ~55%, silver up ~130%.
• Retail inflows: “over $70 billion” into gold ETFs across 2025–2026 (mostly retail).
• Oil shock estimate: ~20% of global oil supply could be disrupted by Strait of Hormuz issues.
• Oil price thresholds mentioned: $100, $120 and Goldman Sachs’ $180 scenario.
• Gulf states’ gold reserves cited as examples: Saudi ~300 tonnes, Qatar ~115 tonnes.
• Rules‑of‑thumb thresholds:
  • DXY > 100 = negative for gold; DXY ≈ 96–97 or lower = favorable for gold.
  • 10‑yr yield > ~4% = pressure on gold; < ~3.5% = supportive for gold.

Step‑by‑step causal framework

1. Military strikes → Iran retaliation → potential disruption of the Strait of Hormuz.
2. Tanker traffic halts → a large portion (presenter cites ~20%) of oil supply is disrupted.
3. Oil prices spike → higher costs across fuel, food, fertilizer, plastics.
4. Higher inflation expectations → central banks keep rates higher for longer or raise them.
5. Bond yields rise and the USD strengthens → fixed income attracts capital.
6. Algorithms and systematic traders detect higher yields/stronger USD and sell paper gold → heavy selling in futures/leveraged products.
7. Leveraged ETFs rebalance daily and margin calls can force further selling → cascading/death‑spiral selling in paper gold.
8. Meanwhile physical market withdrawals occur (COMEX outflows) and Asian/central bank buyers accumulate physical at a discount.

Mechanics and methodology explained

• Leveraged ETF mechanics: 2x/3x ETFs rebalance daily; during down days they sell to maintain leverage, which can amplify declines and trigger margin calls.
• Paper vs physical split: futures and derivatives can move paper prices very quickly; physical metal flows (withdrawals, central bank buying, Shanghai premiums) can diverge and reflect different demand dynamics.
• Algo trading: systematic rules respond to macro signals (rates, USD) and often ignore geopolitical “safe haven” narratives.
• Historical analogy: 1983 crash involved oil‑exporting nations selling gold to raise foreign currency — current dynamics may produce similar sovereign selling outcomes even if the trigger differs.

Explicit recommendations, cautions and risk management guidance

• Warnings:
  • Leverage magnifies losses; leveraged gold ETFs are high risk and can cause margin calls and rapid losses.
  • The recent move could extend beyond a single week; an extended consolidation/reset is possible (presenter cites the post‑1980s example).
• Presenter’s advice (not financial advice):
  • Prefer physical gold or unleveraged, physically backed gold ETFs for long‑term exposure.
  • Avoid using leveraged products as short‑term get‑rich‑quick instruments; understand daily rebalancing and margin risk.
  • Maintain a time horizon and liquidity; accumulate on dips if you’re long‑term bullish and patient.
  • Monitor macro indicators (Fed policy, DXY, 10‑yr yield) rather than headlines.
  • Watch physical market flows (COMEX inventories, central bank purchases, Shanghai premia) for informative divergence signals.
• Rules of thumb reiterated:
  • DXY > 100: negative for gold; DXY ≈ 96–97 or lower: positive.
  • 10‑yr yield > ~4%: negative for gold; < ~3.5%: supportive.
• Disclaimers given: presenter states he is not a registered financial adviser and that this is not personalized investment advice.

“I’m not a registered financial adviser / not financial advice.” “I’m not telling you to buy or sell.”

Performance metrics and market‑structure observations

• Heavy retail buying into ETF/leveraged products during the 2025 rally (over $70bn) amplified both the rally and the subsequent selloff via rebalancing/margins.
• Paper market volatility is often larger and shorter‑term than physical market movement.
• Central banks and Eastern buyers are removing physical metal from exchanges at discounts; COMEX inventories are reported to be falling.

Potential scenarios and macro implications

• Short term: paper prices may remain volatile and depressed due to algorithmic/leveraged selling, sovereign asset sales, and higher yields/USD.
• Medium/long term: if the Fed cuts rates (due to recession/weakening) or if DXY and yields fall, gold could reverse sharply; central bank and physical demand support the long‑term store‑of‑value thesis.
• Risk of a prolonged, multi‑year (even decade‑long) consolidation similar to the post‑1983 period exists if structural conditions persist; alternatively, this could be a buying opportunity for patient accumulators.

Other notable mentions

• Shanghai market paying a premium on physical gold.
• Central bank purchases remain an important structural demand component.
• Presenter criticized simplistic mainstream narratives (e.g., “inflation down → Fed holds → gold down”) and emphasized the systemic interplay: oil → rates → USD → algos → leveraged selling.

Presenters and sources (as cited)

• Presenter: Felix P. — ex‑investment banker, founder of “Goat Academy,” co‑founder of TradeVision (runs live trainings).
• Referenced entities: Goldman Sachs (oil forecasts), COMEX, Asian central banks / Chinese investors / Shanghai market, Gulf states (Saudi, Qatar), hedge fund algorithms, unnamed retired Wall Street mentors.

Concise action checklist (from the video)

• Avoid leveraged (2x/3x) gold ETFs unless you fully understand daily rebalancing and margin risk.
• Prefer physical gold or physically backed, unleveraged ETFs for long‑term holdings.
• Monitor DXY and the 10‑year Treasury yield (headwinds: DXY > 100, 10‑yr > ~4%).
• Watch physical flows: COMEX inventories, central bank buying, Shanghai premiums.

Disclosures

• Presenter explicitly states he is not a registered financial adviser and that the content is not personalized investment advice.