Gold Trades a Two-Speed Market as Fed Patience Meets Record Fund Demand

Gold is being pulled in two directions at once, and the tug-of-war — not any single price move — is the story. On one side sit physically backed funds and central banks, still adding metal. On the other, speculative accounts are trimming exposure. Spot gold finished the day up 1.3% at $4,153.69 an ounce, recovering from the prior session's slide on a softer dollar and falling Treasury yields.

That rebound landed as traders reworked their odds on another Federal Reserve hike. San Francisco Fed President Mary Daly signaled no need to move at the next meeting, while Fed Vice Chair for Supervision Michelle Bowman said there is time to wait. Neither comment amounts to an all-clear. Daly was explicit that further steps may still prove necessary, leaving the door open even as near-term rate pressure on bullion eases.

A data gauntlet before the FOMC

The backdrop is yesterday's US consumer price report, where inflation ran hotter than forecast, sharpening rate-hike bets and weighing on gold. Attention now shifts to September retail sales and producer prices, both due today, for fresh reads on demand and price pressure. The next policy milestone is the FOMC meeting on October 27–28, with the rate decision set for October 28.

Official-sector buying offers a separate source of support. Preliminary World Gold Council figures put central bank purchases at roughly 63 tonnes in September, the strongest monthly tally since November 2024, based on central bank filings and IMF data. That gives shifting rate expectations something concrete to lean against, though it does not settle the question of where policy goes next.

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Record ETF stockpile, retreating futures positioning

Fund flows tell a similarly one-sided story. The World Gold Council reported global inflows of 67 tonnes into physically backed gold ETFs in September, lifting worldwide holdings to a record 4,256 tonnes. That build forms the backdrop to further inflows into Chinese gold ETFs in early October.

Meanwhile, net long positions on the COMEX fell by a total of 100 tonnes in September. Physically backed funds were absorbing metal even as net bullish positioning in the futures market shrank — the contrast that defines how the latest headlines should be read.

China adds a second pillar

China's demand provides a counterweight to futures-market selling. The World Gold Council reported a 23-tonne monthly gold purchase by the Chinese central bank, the largest since October 2023, alongside the early-October ETF inflows. The report ties official buying to demand through investment products, but it does not describe the same activity as speculative fund selling in the futures market. Different buyer groups mean the gold market cannot be reduced to a single, uniform wave of buying or selling.

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TD Securities commodity strategist Ryan McKay said yesterday that speculative funds cut long positions after a failed test of resistance, with the surprisingly hot US inflation print amplifying the selling. He also pointed to systematic selling.

For investors, the split matters. Rising ETF holdings do not rule out short-term selling pressure, and the retreat of speculative buyers does not automatically mean demand through physically backed funds is fading. The record stockpile is no proof that every investor group is adding. The takeaway: ETF inflows and central bank purchases are buttressing demand while speculative selling can still drag on price — a counterweight to the selling, not evidence that it has run its course.

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