March was the weakest month for gold since June 2013, driven by liquidity dynamics, but the World Gold Council maintains that gold’s core fundamentals remain intact
London: The World Gold Council (WGC) has outlined the drivers behind World Gold Council sharp correction in March 2026, attributing the decline largely to liquidity pressures and momentum-driven selling rather than any deterioration in underlying fundamentals.
According to its latest‘Gold Market Commentary’, prices dropped 12% during the month of March 2026 to $4,608/oz, marking the steepest monthly fall since 2013. The decline was seen across all major currencies, although prices remain higher on a year-to-date basis.
The report highlights that exchange-traded fund (ETF) outflows were a key contributor, with holdings falling by $12 billion (84 tonnes), led by North America and Europe. In contrast, Asian markets recorded inflows, signalling dip-buying activity.
Futures positioning also weakened, with The Commodity Exchange Inc. (COMEX) managed money net long positions declining by $2 billion (19 tonnes). However, overall positioning remains net bullish, indicating that investor sentiment has not fully reversed.
Using its Gold Return Attribution Model (GRAM), the World Gold Council identified rising US interest rates and a stronger dollar as major headwinds. These factors were compounded by deleveraging and broader liquidity dynamics across asset classes.
The sell-off appeared counter-intuitive, given persistent geopolitical tensions and inflation concerns. However, the report notes that gold over-reacted to real yield shocks, with rapid unwinding of leveraged positions causing prices to overshoot on the downside.
Deleveraging was visible across segments, with retail and institutional investors reducing exposure. Retail positions on COMEX fell by 18 tonnes, while systematic strategies such as CTA-driven selling accelerated declines after gold breached key technical levels, including its 50–55 day moving average.
Cross-asset pressures also played a role, as volatility in equity and bond markets prompted investors to raise liquidity, contributing to gold liquidation. Central bank-related activity, including Turkey’s use of gold as collateral, may have added marginal pressure but was not a primary driver.
Regional disruptions, including Middle East flows, had limited global impact, with only modest changes in local demand and premiums in Dubai.
Looking ahead, the report points to early signs of stabilization, including a softer US dollar and renewed ETF inflows in April. Options markets also indicate elevated but more defensive positioning.
While short-term risks remain—particularly from high oil prices, potential yield spikes, and further deleveraging—the World Gold Council maintains that gold’s core fundamentals remain intact.
The report concludes that March’s correction was largely technical and liquidity-driven, with “green shoots” suggesting the potential for a renewed upward trend, even as markets remain sensitive to geopolitical and macroeconomic developments.
Retail Jeweller India News
