September review 

A surge in US Treasury yields and  the US dollar alongside a drop in  futures positions helped drive  prices lower in September, despite  

Yet September was unusual: despite the price decline, global gold ETFs recorded US$10bn (67t) of inflows across regions. North America led the charge, followed  by Europe and Asia. 

Key Takeaways & Market Drivers

1. September Price Retreat

• Price Movement: Gold dropped 8.5% m/m in September to close at $4,176/oz (USD), experiencing broad declines across all major international currencies.
• Primary Drivers: Macro headwinds drove prices lower, specifically a 53 bps surge in US 10-year Treasury yields (to 5.3%) and a 2% gain in the US Dollar Index (DXY), as captured by the Gold Return Attribution Model (GRAM).
• Derivatives Liquidation: COMEX net managed money positions shrank by $12bn (84t), while spreading positions fell by $22bn (156t), putting heavy downward pressure on spot prices.

2. Divergence: Physical ETFs vs. Derivatives

• Unusual Contrast: While futures/derivatives positions liquidated sharply, physical demand held firm—global gold ETFs saw strong net inflows of $10bn (67t) in September, led by North America, Europe, and Asia.

3. Stellar European & UK Demand in Q3

• Record Demand: UK-listed gold ETFs recorded 54 tonnes of inflows in Q3 (inflows in 12 of 13 weeks), far exceeding model predictions of 18t (a 36t excess).
• Macro Shift: Historical relationships fail to explain the surge. However, since July, excess UK ETF inflows have strongly correlated (r = 0.51) with rising UK term premia.
• Fiscal Concerns: Investors appear increasingly focused on long-term fiscal sustainability (highlighted by the UK Office for Budget Responsibility’s warnings) and persistent inflation risks rather than transient policy events.

Outlook: What to Watch in October

• Fed & Central Bank Meetings: Markets have lowered expectations for further monetary tightening across the Fed, ECB, and Bank of England.
• Key Signal: If bond yields and term premia remain elevated despite dovish rate expectations, it will signal deeper structural concerns regarding fiscal deficits, which should continue supporting strategic gold demand.