Month-end flows and China’s Golden Week cool gold’s record run

The nervously anticipated correction appears underway, with gold reversing lower after reaching another record high near USD 3,900. The move was likely triggered by end-of-month profit-taking and the onset of China’s eight-day Golden Week holiday, which typically removes a key source of physical demand from the market. The metal has rallied nearly 15% since Jackson Hole, supported by lower funding costs, geopolitical jitters, and political noise around the Fed’s independence.

The coming days may prove more telling than the rally itself. The true measure of strength in any market often emerges during a correction, when the easier momentum trade of buying into an advance is replaced by the harder decision of stepping in against falling prices. For gold, the test lies in whether investors treat the setback as a buying opportunity or retreat further to the sidelines. Sustained interest during weakness, as witnessed on numerous occasions since 2023, would underline the depth of conviction behind the record-breaking rally, while a sharper retracement would expose fragility in positioning.

Investor positioning remains elevated. Bullion-backed ETFs recorded the strongest monthly inflow since March 2022, lifting total holdings this year by 13.3 million ounces to a three-year high of 96.7 million ounces. Meanwhile, the speculative net long in COMEX gold futures held by ‘Managed Money’ and ‘Other Reportables’ reached a six-month high of 259k contracts or 25.9 million ounces on 23 September, representing a nominal value close to USD 100 billion. While this is undoubtedly a record in value terms, the total net long remains below the +300k contract peaks seen in 2022, 2024, and earlier this year. Still, these elevated positions make the market more vulnerable to profit-taking, though the longer-term backdrop remains supportive, driven by rate cuts, persistent fiscal debt, and geopolitical concerns—no longer limited to wars but increasingly tied to the breakdown of the post-WW2 world order.

From a technical standpoint, applying Fibonacci retracement levels to the latest run-up since 17 September, a shallow 0.382 correction points to support at USD 3,780, followed by USD 3,750, with USD 3,721 seen as key to maintaining the broader upside focus. Silver and platinum are extending the move at a faster pace due to thinner liquidity and their higher beta to gold. Applying the same retracement rules, support in silver emerges at USD 44.87 and in platinum at USD 1,525.