ETF inflows and CTA covering join China buying behind gold’s $4,200 hold

Most explanations of Monday’s gold move start with oil and the dollar. FXStreet’s early report points to something else as well: money flowing in. Gold traded near $4,215 an ounce in early Asian trading on Monday, FXStreet reported, as three different kinds of buyer showed up at once.

Buyer one: ETF investors

Citing Bloomberg data, FXStreet reports that aggregate inflows into gold exchange-traded funds have reached a four-year high; the report does not say over what period. ETF flows are one of the cleanest measures of investment demand, because every share bought in a physically backed fund is matched by metal in a vault. That fits with the World Gold Council’s record third quarter, which we break down in Record $31bn Q3 gold ETF inflows.

Buyer two: the People’s Bank of China

China’s central bank added 740,000 ounces — about 23 tonnes — in September, its 23rd month of purchases, FXStreet notes. See PBoC’s September gold add for the detail.

Buyer three: trend-followers covering shorts

TD Securities, quoted by FXStreet, flagged short covering by CTAs in gold and platinum — in gold, buying back shorts equal to some 7% of their historic maximum position size. CTAs — commodity trading advisors — are funds that follow price trends systematically: they sell when prices fall and buy when they rise. During last month’s slide, many would have built short positions. When the price turns up, those funds have to buy back what they sold, and that buying can add to a rebound regardless of any news. It is one reason turns in gold can be sharper than the fundamentals alone would suggest.

TD Securities also raised a longer-term idea: the “stage being set for the yellow metal to disconnect from real rates further and begin a new bull run into 2027.” That is TD’s view, and a speculative one — for most of the past two decades real rates have been the single best guide to gold, as our guide to what moves the gold price explains.

The counterweight: a hawkish Fed

None of this removes the main headwind. FXStreet cites CME FedWatch at about 17.7% for an October hike and 84.1% for December, and notes that St. Louis Fed president Alberto Musalem remains hawkish: “more monetary policy firming will be required” to bring inflation back to 2%, he said. Reuters, via CNBC, put the odds at about 17% and 86% — slightly different readings of the same tool on the same day. Either way, the market expects another hike before year-end.

So gold’s hold above $4,200 rests on buyers who are, for now, outweighing the rate risk. Whether that lasts runs through Wednesday’s inflation data — see Have gold and silver bottomed?.

Every figure here is as reported by the publications listed under Sources, at the time they reported it. Prices move; the live gold price has the current one. Nothing on this page is investment advice.