New Delhi: Gold fell 12 per cent in March to USD 4,608/oz, its weakest month since June 2013, according to a report by the World Gold Council (WGC). The precious metal lost value across all major currencies but maintained a positive position for the year.
The council used its monthly Gold Return Attribution Model (GRAM) to identify that much of the decline stemmed from momentum factors, including global gold ETF outflows, a COMEX nlong unwind, and a price trend reversal.
“Our monthly attribution model GRAM captured the sentiment – but not the magnitude – of the move, attributing much of the drop to momentum factors: global gold ETF outflows, a COMEX net long unwind and a price trend reversal,” the World Gold Council stated.
COMEX stands for the Commodity Exchange Inc., which is the primary futures and options market for trading metals like gold, silver, copper, and aluminum.
The report noted that “Global gold ETFs shed USD 12bn (84 tonnes) during the month, led almost entirely by North America with USD 14bn (-87t) and Europe with USD 0.1bn (-7t). Asia’s USD 1.9bn (10t) inflows were a welcome positive, and highlight how dipbuying in Asia translated into much larger fund flow but lower equivalent tonnes.”
“While real yields and the dollar undoubtedly contributed to net sales, other factors were also likely at play,” the report mentioned.
Positioning played a role as a reported build-up in retail exposure to gold risked a flush out. COMEX Non-Reportable positions, which the report associated with retail exposure, saw a cumulative 18-tonne net drop during the first three weeks of March. This aligned with a 22-tonne drop in Managed Money, reflecting more institutional activity.
A portion of gold ETF sales likely originated from retail hands, with the US accounting for the bulk of the 80 tonnes lost globally between the start of the month and March 24.
“CTA-driven selling likely amplified downside momentum. Estimated and anecdotally reported Commodity Trading Advisors (CTA) were very long heading into mid March. They reportedly unwound positions sharply when gold broke through its 50/55-day moving average on 16 March for the first time in seven months,” the Council observed.
Broader cross-asset deleveraging also spilled into gold as elevated margin debt relative to market capitalisation contributed to widespread equity selling. Gold faced liquidation pressure as multi-asset investors, including CTAs with equity exposure, reduced positions to meet liquidity needs and reduce portfolio risk. Bond market dynamics reinforced this pressure as US bonds were sold on a near-term inflation shock, causing 2-year nominal yields to shoot higher.
Central bank intervention further added to downward price pressure following “a decision by The Central Bank of the Republic of Turkiye (CBRT) to use approximately 50t of gold as collateral, predominantly via swaps, may have fuelled rumours of selling.”
“That this was liquidity driven and not a change in gold strategy is backed up by data at the US Fed suggesting increased outright selling of US Treasuries by central banks to buffer higher energy price risk was occurring in tandem,” the report said.
Looking ahead, the World Gold Council found that fundamentals began to reassert themselves as the dollar struggled to sustain gains and early April ETF flows turned positive. While risks remain regarding oil prices and potential cross-asset deleveraging, the report noted that investors continue to view gold favourably over a medium-term horizon.
