Gold and the Hormuz Disruption: A Monetary Stress Test

Sprott argues the March gold selloff was a liquidity-driven washout rather than a broken bullish thesis: spot gold fell $610.87/oz, or 11.57%, to $4,668.06 at month-end, after an intraday low of $4,099.17 in thin overnight liquidity and a break below the $5,000 level. The note says the drawdown was amplified by forced selling, de-grossing and deleveraging across large funds, compounded by the loss of reserve-style bid from Gulf oil revenues being disrupted by the Strait of Hormuz shock. The broader macro message is stagflationary: an energy shock is pushing inflation expectations higher while growth slows, tightening financial conditions and leaving policymakers little room but to re-add liquidity. Sprott frames that as supportive for real assets, especially gold as a store of value and monetary anchor. The article also flags silver as a beneficiary of energy insecurity, with solar demand adding a strategic tailwind. For trading, the key takeaway is that gold’s medium-term thesis remains intact even after the sharp correction, with prices already recovering about two-thirds of the drop from $5,000. Near-term risk remains two-sided: further liquidation could hit in thin liquidity, but any policy response to the energy shock/inflation mix should be supportive for bullion and keep volatility elevated. The setup is constructive for dips, particularly if rates volatility and geopolitical stress persist.