The escalating conflict in the Middle East — especially the closure of the Strait of the Hormuz — had an adverse effect on many investment strategies in March, and gold was no exception. The spot gold price closed out March at $4,668.06. This represented gold’s monthly drop of 11.57% and its largest monthly decrease since October 2008.
Key Takeaways
- The price of gold fell significantly in March. This was due to a need for liquidity, not weakening fundamentals.
- Long-term, central banks may lean into gold’s liquidity and merits as a neutral reserve collateral in order to combat inflation.
- Despite gold’s weak March performance, the Sprott Gold Miners ETF (SGDM) still offers impressive year-to-date results, which could give investors a good option to ride the gold theme in the long term.
A few naysayers looked at the performance of gold in March and viewed it as evidence that the metal’s merits as a store of value are fading. However, some experts have argued that the sell-off was driven by a need for liquidity, not because gold is losing its luster.
See More: Gold’s Sell-off Is About Liquidity, Not Fundamentals
Liquidity & Core Monetary Value During Crisis
Crucially, what’s going on in the Strait of Hormuz could end up working in gold’s favor. This is according to Paul Wong, CFA, managing partner and market strategist at Sprott. He recently examined how gold may perform if the Strait remains closed for an extended period of time.
Wong noted that if the Strait remains closed or disrupted for a prolonged period of time, central banks and global trade will continue to be pressured. If central banks face limited options for adding liquidity, gold’s role as a store of value can help it stand out amongst other real assets that the banks can employ.
“Initial gold weakness reflects liquidity-driven selling,” Wong explained. “That weakness is temporary. Over time, as energy scarcity constrains policy choices, gold further decouples from financial market rate-based frameworks and reasserts as a core monetary asset.”
Gold’s potential to help inject liquidity into struggling markets across the globe shouldn’t come as a particular shock. The metal can work as a neutral reserve collateral due to it not carrying credit or counterparty risks.
A Potential Buy Opportunity for Gold
Putting this all together, advisors and investors may want to take advantage of the sell-off and buy into a potential gold dip. After all, if the Strait of Hormuz remains disrupted in the long-term, those who stuck with gold may end up reaping the benefits.
See More: Why Gold’s Liquidity Crunch could Be a Buying Opportunity
The Sprott Gold Miners ETF (SGDM) can help investors remain engaged with the gold theme in their portfolios. SGDM provides focused exposure towards larger gold miners who are listed in the U.S. and Canada.
Even though the gold market had a rough March, SGDM is still putting up good numbers this year. Year-to-date, SGDM’s NAV has risen 8.75%, as of March 31, 2026.
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Content Hub.
Originally published on ETF Trends
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Funds that emphasize investments in small/mid-cap companies will generally experience greater price volatility. Diversification does not eliminate the risk of investment losses. ETFs are considered to have continuous liquidity because they allow an individual to trade throughout the day. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses, affect the Fund’s performance.
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Exchange Traded Funds (ETFs): SETM, LITP, URNM, URN, COPP, COPJ, NIKL, SGDM, SGDJ, SLVR, GBUG, METL
Physical Bullion Funds:PHYS, PSLV, CEF, and SPPP.
Gold and precious metals are referred to with terms of art like store of value, safe haven and safe asset. These terms should not be construed to guarantee any form of investment safety. While “safe” assets like gold, Treasuries, money market funds and cash generally do not carry a high risk of loss relative to other asset classes, any asset may lose value, which may involve the complete loss of invested principal.
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