A letter sent to our investors

26 March 2026

Subject: Gold’s correction was driven by liquidity, not fundamentals

Dear Investor,

Many of you have been watching the gold market closely and waiting for an attractive entry point (or to add to your position). In our view, the moment may now be here.

Since its all-time high in late January of US$5,589 per ounce, gold has sold off to approximately US$4,400 per ounce (at the time of writing), a decline of around 20%. Gold miners have been hit even harder with the universe falling around 30%. This is causing some to question gold’s fundamentals, given the geopolitical and macroeconomic backdrop, which is perceived to be good for gold.

Our view is that the selloff has been driven by liquidity and technical factors, rather than fundamentals.

The key drivers of gold’s correction:

• Leveraged speculators were forced to liquidate – there was evidence of speculation and leverage in gold markets coming into the Iran conflict. As the gold price began to correct, leveraged investors were forced to sell to meet margin calls. Gold was also likely to have been a liquidity source amid market-wide deleveraging which was catalysed by the conflict with Iran.
• Sudden pivot in expectations for higher interest rates, a stronger US dollar, and higher real yields – expectations for an oil shock, leading to an inflation shock, necessitating higher interest rates. We see a greater likelihood that the oil shock leads to an economic slowdown, higher unemployment, central banks considering the inflation shock to be transitory, and therefore lower interest rates.
• Large sovereigns raising dollar liquidity – it has been reported that Russia has been selling gold to fund its budget deficit (linked to the war in Ukraine) and Turkey selling gold to support its currency and fund emergency energy imports.
• Petro-dollar flows constrained by the oil shock – the closure of the Strait of Hormuz (constricting approximately 20% of global oil supply) reduced the flow of US dollar profits from the sale of oil being recycled into gold.

The gold price weakening in the face of these factors is not a reflection on gold’s structural fundamentals.

Gold’s recent experience has been no different to equally unexpected episodes in 2008 and 2020 when gold demonstrated its sensitivity to a market liquidity squeeze. Gold’s fundamentals ultimately prevailed and the gold price rallied by 167% and 40% respectively following the lows in those episodes.

Looking forward, gold’s key structural driver remains firmly in place, underpinning our outlook for gold to remain in a multi-year uptrend: Global reserve asset diversification – the continued diversification away from US Treasuries as the primary reserve asset appears inevitable. Gold is one of the main beneficiaries of this established trend and we see considerable potential for acceleration.

You will recall we have been writing about gold’s fundamentals for the last few years in our gold market updates. We see the current dislocation as a compelling opportunity to add exposure to high-quality gold equities (many of which are generating higher EBITDA margins than Nvidia) at valuations that are materially lower than they were three weeks ago.

NO17 Gold’s core positions are trading on less than 10 times 1-year forward free cashflow with an All-in Sustaining Cost (AISC) of production that is orders of magnitude below the current gold price.

Given the uncertainty in the short term in the Middle East, we would favour a staggered approach to capital allocation. Please reach out if you would like to discuss.