Gold Buying Season Begins Despite Investor Profit-Taking

Gold recorded a historic run in September and into the first half of October, rising roughly 26 percent and setting repeated all time highs. The recent pullback from 4,378 dollars per ounce to near 4,100 dollars reflects the release of near term speculative pressure rather than any degradation of structural demand forces.

Goldman Sachs highlights that sticky and strategic investor interest remains the central story. Their analysts maintain a 4,900 dollar target by end 2026 and cite upside risk based on portfolio diversification demand from sovereigns, pensions, and private wealth holders.

"Sticky, structural buying will continue further."

The long term bid appears durable as institutional allocations remain low relative to reserve and asset base sizes. Even small shifts in weighting can create powerful price effects in the limited gold market float.

One of the clearest indicators of the nature of the recent move comes from the largest gold ETF. GLD accounted for 8 percent of all US listed ETF trading volume on the sharp down day. Yet holdings declined by only around 200 thousand ounces which represents a change of roughly 0.6 percent.

Despite record volumes on a down day, little was net sold in GLD and other Gold ETFs specifically marketed to high net worth players like GLDM. This indicates tremendous structural bullishness according to Goldman.

Products beyond GLD, such as GLDM, which are inherently marketed towards wealth/RIAs, have faced net inflows since 10/21. Given the liquidity of primary markets, if there was an outsized supply shock for this investor base, it feels like that would've been indicated in yesterday's flows for this segment.

What's it mean? It means the sellers were US CTAs and some US GLD ETF sellers. The buyers were ETF folks in China and US GLDM ETFs (Buy-season types).

Chinese gold ETFs also added materially month to date which helped absorb algorithmic driven selling pressure.

Resilience at the fund level points toward conviction holders. They did not liquidate during a rapid five percent shock.

The World Gold Council reports the strongest quarter on record for physically backed gold ETFs. Global inflows reached 26 billion dollars in Q3 and total assets under management climbed to 472 billion dollars which is 23 percent higher versus the prior quarter.

North America and Europe propelled the expansion while Asia still finished positive. Holdings ended the quarter only two percent below the peak from November 2020.

Elevated turnover also confirms strong participation. Trading volumes across all channels rose to 388 billion dollars per day in September.

These flows illustrate a structural desire to carry gold exposure during a time when macro volatility and fiscal uncertainty remain central to asset allocation decisions.

Goldman Sachs traces the trigger to complex positioning dynamics. Many investors expressed bullish views using short dated call structures that were vulnerable to rapid volatility. Knockout clauses (their clients) likely forced dealers (Goldman's Traders) to sell futures into falling markets.

In addition, silver experienced a violent correction as locational stress in London rapidly eased. This set off cross metal unwinds that included selling of gold positions in both futures and ETFs.

This combination represents temporary flow mechanics. It does not reflect long horizon demand drivers.

Gold's story today is increasingly defined by sovereign and institutional behavior. Goldman notes growing participation interest from reserve managers and pension systems in client discussions. Their prior research shows that as of 2020 roughly seventy percent of US institutional investors had zero gold exposure. Average allocations among holders were below two percent.

Allocators in this category typically engage through drawn out mandate approvals and long capital cycles. The rally may only reflect the early stage of a multi year shift.

Central bank demand remains higher than pre 2022 averages. The pattern in recent months may be slower than the last two record buying years yet it still carries significant weight in price discovery.

Recent data suggest that market psychology is transitioning toward expectations of lower stagflation risk and a more benign policy environment. Optimism around asset prices has increased and the hedging need has reduced somewhat.

A near term consolidation therefore appears reasonable after the very rapid appreciation from late August onward. A moderate correction scenario would resolve recent speculative overreach while preserving the foundations built by longer term buyers.

That said, we are worried technically speaking short term that despite the tremendous bounce off the lows last week, and the RIA purcahses indicating "Buy-Season" is upon us, the follow through was tepid. We may need a week before things kick in if they do.

The froth is gone, but the heat underneath the market maybe be cooling a little as well. IF Trump/Xi yields certainty (no matter how good/bad) it would cause a market with almost no shorts in it to be susceptible to a long puke (short squeeze opposite). Maybe this year if you are bullish Gold buy a little Oil as well

Long term, the trade problems with China only mean the US must debase further (that is happening by our own hand) to remain competitive while hoping China also stops debasing against gold.. which is not happening. Based on their gold reserved for monetary purposes.

US political developments also influence perceived tail risks. Any initial stabilization of the trade and policy outlook could dampen defensive flows in the short run. A declaration of progress or conflict resolution, even if partial, supports a more confident tone in broader markets. Bitcoin's rally this weekend seems to predict as much considering its behavior is tied to stocks this past year almost exclusively.

BTC goes up when stock momentum increases all year

The rally into record territory and the high volume pullback form a single narrative. The core structure of gold demand remains intact and broad based. The selling event was driven mainly by tactical positioning rather than strategic liquidation. The question remains as to how much more selling the CTA types have. The battle right now is between CTA sellers and ETF buyers, both of which arehistroically fickle. But this year we have China investors on our side

ETF resiliency, persistent sovereign activity, and increasing institutional engagement define the current market. They provide a strong foundation even as momentum cools after a surprising surge.

Gold remains structurally supported and well aligned with long horizon diversification and reserve strategies. A period of digestion would not contradict strength. It would reinforce it.