Gold prices experienced extreme volatility on Monday, initially plunging to around $4,098.60 before staging a strong rebound above $4,500. This sharp reversal followed an announcement by former President Donald Trump to delay planned strikes on Iranian energy facilities by five days. However, Gareth Soloway, Chief Market Strategist at Verified Investing, suggests the trigger for the sell-off may extend beyond Middle East tensions. He points to a combination of surging US Treasury yields and mounting liquidity pressures within the $2 trillion private credit market, which may have sparked cross-asset selling and margin calls.

While media reports focused on the market's "risk-on" reaction of rising equities and falling oil prices following the delayed strikes, attention has simultaneously grown around liquidity risks. This concern intensified after firms like Morgan Stanley and Cliffwater recently imposed redemption restrictions on their private credit funds.

From a market perspective, gold exhibited a dramatic intraday swing. After the opening drop, prices rapidly recovered when Trump described US-Iran communications as "very good and productive" and announced the delay. A headline on Kitco's platform, stating "Gold washes out weak hands in $2 trillion credit squeeze," further indicated the market viewed the plunge as more than just a geopolitical trade.

Soloway believes the sell-off demonstrates gold is increasingly behaving like a "risk asset" rather than its traditional safe-haven role. His core thesis is that during liquidity stress in other market segments, highly liquid assets like gold are often sold first to cover margin requirements or losses in other positions. This logic echoes the pattern seen during the 2020 liquidity crisis, though he identifies the current pressure points as concentrated in private credit and bond markets.

Soloway specifically highlighted growing signs of liquidity strain in the approximately $2 trillion private credit market. Public reports show Morgan Stanley and Cliffwater have imposed redemption limits on their semi-liquid private credit funds for retail and wealth clients. For instance, Morgan Stanley's North Haven Private Income Fund fulfilled only 45.8% of redemption requests in Q1 2026, enforcing a strict 5% quarterly redemption cap. Similarly, the Cliffwater Corporate Lending Fund faced redemption requests nearing 14% of its net asset value but only met about half of them.

The Wall Street Journal also reported that as redemption pressures mount, banks are providing financing to related institutions to help meet liquidity needs, though sentiment in this sector has noticeably deteriorated.

Soloway argues that such liquidity constraints, when combined with market volatility, can easily trigger cross-asset forced selling. He notes that when investors face unrealized losses exceeding 20% in other positions, margin calls force them to liquidate more liquid assets, with gold often being the first casualty. It is important to note this is the analyst's personal interpretation and not an official statement from regulators or fund managers. This macro backdrop is supported by the recent redemption restrictions implemented by funds like Morgan Stanley and Cliffwater.

Soloway also linked Monday's gold plunge to rising US Treasury yields. He theorizes that the factor compelling the White House to de-escalate military rhetoric may not have been solely a diplomatic reassessment, but potentially alarm signals from the bond market. The 10-year Treasury yield climbed towards 4.2%, approaching the critical 4.5% threshold.

Following Trump's announcement of delayed strikes and subsequent improved risk sentiment, Soloway inferred that bond market pressure effectively delivered the impact of a "50 basis point rate hike," forcing the White House to calm markets.

Compared to gold, Soloway views the adjustment in silver as more severe. He believes silver, while "more oversold than gold," still exhibits bearish technical patterns, trading within a typical "bear flag" consolidation. He has previously identified the $50 area as a key potential accumulation zone for silver, noting that a third test of support near $70 does not necessarily indicate a definitive bottom.

In late US trading Monday, spot silver settled at $69.085, up 1.76%.

Despite near-term caution, Soloway maintains a long-term bullish outlook. He continues to anticipate a potential gold pullback towards the $3,500 area, viewing it as a revisit of a key resistance-turned-support level from April 2025. In his framework, the current decline is a necessary "cleansing process," after which gold could rapidly recover, similar to the post-2020 liquidity crisis, exhibiting a so-called "phoenix effect."

He predicts that if gold falls to around $3,500, it may not stay there long, potentially returning to the $5,000 zone within 3 to 6 months. Over the longer term, should currency debasement trades re-emerge as a dominant theme, gold could even challenge $10,000. It must be emphasized that these are the analyst's personal forecasts and do not constitute factual conclusions or investment advice.