Money Is Fleeing Gold ETFs — But the 3 Core Logics Supporting Gold Prices Remain Unbroken
💬 Gold Investors: Is this massive ETF selloff a buying opportunity? Do you still trust gold’s long-term hedge value?
While conflicts in the Middle East rage on, the gold market has witnessed an unusual “capital exodus.” According to Bloomberg Intelligence data, as of March 26, approximately 100 commodity ETFs across the U.S. have recorded net outflows of around $11 billion — the largest single-month redemption since records began in 2005.
Among them, gold funds led by $SPDR Gold ETF(GLD)$ suffered the most severe outflows, with over $7 billion exiting a single product. Silver ETFs also saw roughly $1.4 billion in redemptions.
Against the backdrop of escalating geopolitical conflicts — which should stoke safe-haven sentiment — gold ETFs are facing the biggest selloff in history. This divergence has confused many market participants.
“Commodity ETFs have seen record outflows amid a selloff, which is unusual because these funds are typically viewed as hedges against inflation and risk,” noted Athanasios Psarofagis, Bloomberg Intelligence analyst. “More notably, this selloff is driven primarily by gold and silver, not oil and gas ETFs.”
In fact, the United States Oil Fund (USO) has 反而 attracted about $400 million in inflows since March.
Behind the capital flight is a steady decline in gold prices since the Iran conflict erupted in late February. As of March 26, spot gold has fallen approximately 15% from its pre-conflict high, while silver has dropped 25% — significantly underperforming the S&P 500, which is down just 5% over the same period.
Yet beneath the apparent “disconnect” between market sentiment and price trends, the core logics supporting gold’s long-term investment value remain unbroken.
Logic 1: Geopolitical Safe-Haven Demand Persists — Only the Trigger Mechanism Has Changed
Robin Brooks, senior fellow at the Brookings Institution and former head of FX strategy at Goldman Sachs, argues that the recent gold price decline does not negate its status as a safe-haven asset. In his latest analysis, he points out that the S&P 500 has fallen only 5% — far from the threshold for a “large-scale safe-haven rush” — so gold’s safe-haven properties have not been truly activated.
“When Russia invaded Ukraine, gold also did not rise significantly, which is similar to the current situation,” Brooks said. Instead, he noted, the recent pullback is more a result of “position liquidation” rather than a failure of the safe-haven logic.
Logic 2: The Hedge Against Fiat Currency Depreciation Remains Intact — Fiscal Discipline Is Still Loose
In Brooks’ view, another core logic supporting gold’s medium-to-long-term strength — hedging against currency depreciation — remains solid. “Fiscal policies in the U.S. and other countries are just as undisciplined as they were before the war, so demand for hedging against the risk of debt monetization will persist.”
This judgment echoes gold’s steady rise from late 2025 to early 2026: even before large-scale safe-haven demand was triggered, gold had already moved higher amid market concerns about expanding fiscal deficits in major global economies.
Logic 3: Capital Outflows Are More About “Profit Taking” and “Liquidity Calls” — Not a Logic Reversal
Regarding the nature of this round of outflows, many analysts tend to attribute it to short-term behavior rather than a structural reversal of logic. Psarofagis points out that since gold had accumulated significant gains before the conflict, “investors, fearing a pullback, chose to take profits — that’s the most direct reason.”
Carley Garner, senior commodity strategist at DeCarley Trading, also believes that “many metal buyers are experiencing ‘buyer’s remorse’ after a rapid and sharp pullback and are now looking for the next direction.”
In addition, Brooks added another explanation: rising overall market volatility has led some institutions, such as hedge funds, to face margin calls, forcing them to sell profitable positions like gold to free up liquidity. “This does not mean gold’s hedging properties have failed; it reflects the complexity of the current market environment.”
Short-Term Volatility Does Not Alter Long-Term Logic
From a trading structure perspective, this round of selling indeed shows typical characteristics of “retail profit taking.” Bloomberg data shows that commodity ETFs recorded net inflows for the ninth consecutive month in February, attracting nearly $7 billion — much of which came from retail investors who had rarely participated in precious metals trading before.
“The sharp rise in precious metals before the war undoubtedly attracted a large number of retail investors, which may change the trading behavior of precious metals, making them behave more like risk assets in certain phases,” Robin Brooks said. “But this is a short-term price behavior change brought about by a broader investor base, and it does not negate gold’s role as a long-term safe-haven and anti-depreciation tool.”
For long-term allocators, while the figure of the largest ETF redemption in history is striking, what truly matters is whether the three underlying logics supporting gold prices still hold. For now, not one of them has been broken.
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