Mar 2026

Precious snapshot – Fed in a quandary?

By Rhona O'Connell, Head of Market Analysis, EMEA & Asia

Gold treading water as oil tops $100

The conflict in the Gulf appears to be escalating in places. US advisors are reported to be trying to get everything down to a finish sooner rather than later, but it is very difficult to call. President Trump is asking a number of nations to “help” in opening the Strait of Hormuz, which typically carries 20% of oil trade flows; he is hinting that NATO could be under pressure if this help is not forthcoming. On the other side, the election of the new Iranian leader Mojtaba Khamenei, a reportedly hard-line son of the previous incumbent, arguably sends a signal of defiance. There are conflicting reports about the possibility of negotiations, with the US saying that Iran wants to deal but the US wants better terms, while an Iranian spokesman has noted that Iran has asked neither for a ceasefire or for talks.

Against this backdrop gold has been effectively marking time over much of February and March; the test of $5,600 at end January has not been repeated, with prices hovering between $4,900 and $5,400. Silver has been taking a similar path, finding support just below $80 but retreating below $100. Elevated oil prices, which are helping to heighten inflationary fears, are now prompting suggestions in the press that the FOMC, which meets this Tuesday and Wednesday, may be slightly more hawkish than hitherto, even with weak consumer spending in January – and that was before the war started. The swaps markets are currently pricing in just one rate cut for 2026, to be late in the year.

Source: Bloomberg

At a fundamental level China’s gold demand has held up relatively well in recent weeks, with the strengthening renminbi putting some pressure in domestic prices; as we write the Shanghai market is at a $70 (1.2%) premium to loco London. China enjoyed the Spring Festival in February with wholesale demand dropping only 5t against 12 months previously, to 85t (source: World Gold Council), while ETFs added a sluggish 4t to a total of 290t, still well below the figures of over 2,100t in North America and 1,422t in Europe.

In the background, World Gold Council figures for gold ETFs in the year up to 6th March show net additions of 126t with much of the increase coming from Asia (83t) followed by North America with 37t. Europe is more or less unchanged. Bloomberg’s subsequent numbers suggest a small fall of roughly eight tonnes, but these figures are not comprehensive. Silver ETFs have continued to lose metal, with the latest figures showing 25,289t, a fall of 1,573t or 6% since the start of the year. World silver mine production is ~27,000tpa.

On COMEX, silver inventories have continued to come off sharply over the past few weeks and, at 10,629t, are down by 5,902t since end-September and getting back towards the more normal 9,000-10,000t levels. This may take some of the volatility out of the market as it helps to ease London’s position. Gold inventories at 1,012t are 10% down for the year to date.

Among the Managed Money funds, gold positioning has increased slightly on both sides of the market with outright longs at 389t and shorts at 83. Silver longs have contracted narrowly to 2,132t but shorts have continued to cover and now stand at just 463t; as recently as mid-February they were 2,465t. So it is clear that short covering was a key silver driver (it usually is), even as long positions were contracting (they were 5,589t in early February).

Gold, one-year view; top of trend

Source; Bloomberg, StoneX

Gold:Brent ratio

Outlook: unchanged

On the basis of the above background observations, there is little exchange-based speculative overhang in either metal, reflecting profit taking in silver in January and steady liquidation on COMEX. Now this can be argued either way; a) there is less scope for selling into strength than hitherto or b) stakeholders think the markets are overdone. The answer is probably a combination of the two. Gold has come off from the peaks and is no longer overbought, while silver’s correction is now finding some support. While conflict persists, so will these higher precious price levels, but some of the froth has been blown off. Barring an unwelcome escalation in hostilities it is still possible to argue that these two metals have done enough.

Putting all these together suggests that gold and silver may have done enough for now and need to unwind overbought conditions, but the downside remains limited. Barring further geopolitical escalation, it is time for a breather.

In these circumstances the strength in gold and silver should be sustained until conditions settle down. Until then the markets will remain in risk-off mode.

Gold COMEX positioning, Money Managers (t)