Gold Market Commentary: Go with the flow

Chart 4: Fiscal concerns may explain the excess flows

Correlation between excess UK flows and macro variables*

Open Divergent investor flows configuration options

Johan Palmberg
Johan Palmberg
7 October, 2026
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Gold Market Commentary: Go with the flow
Open Divergent investor flows configuration options
Highlights
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 impressive gold ETF inflows.

Looking forward

UK gold ETFs delivered a stellar Q3. Fiscal concerns may be helping, but this looks less like the short-lived 2022 surge and more like a sustained shift in demand.

Divergent investor flows
Gold finished September at US$4,176/oz, 8.5% lower m/m, with similar declines across all the major currencies we track (Table 1).

Our Gold Return Attribution Model (GRAM) suggests that a rise in yields and a stronger US dollar were major contributors to September’s drop in prices as the US 10-year Treasury yield climbed 53bps to 5.3% and the DXY index rose 2% (Chart 1).

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.

In contrast to strong ETF demand, COMEX positioning contracted sharply. Net managed money positions fell by US$12bn (84t), while total spreading positions (reflecting investors with offsetting long and short positions, typically in different calendar months) declined by US$22bn (156t). This futures liquidation likely contributed to September’s price decline, highlighting the divergence between ETF and derivatives market flows.

Chart 1: A surge in yields and the US dollar alongside a drop in futures positions helped drive prices lower in September
Open GMC Sept 2026: Chart 1 configuration options
Sources: Bloomberg, World Gold Council; Disclaimer

*Data to 30 September 2026. Our Gold Return Attribution Model (GRAM) is a multiple regression model of monthly gold price returns, which we group into four key thematic driver categories of gold’s performance: economic expansion, risk & uncertainty, opportunity cost, and momentum. These themes capture motives behind gold demand; most importantly, investment demand, which is considered the marginal driver of gold price returns in the short run. The ‘residual’ represents the percentage change in the gold price that is not explained by factors already included.
Model estimated over a five year rolling window.

Table 1: Gold prices retreated across the board in September
USD (oz) EUR (oz) JPY (g) GBP (oz) CAD (oz) CHF (oz) INR (10g) RMB (g) TRY (oz) AUD (oz)
September price* 4,176 3,683 21,117 3,149 5,937 3,488 147,613 908 204,707 6,008
September return* -8.5% -6.5% -10.1% -6.6% -6.4% -5.6% -4.8% -5.5% -7.0% -5.7%
Y-t-d return* -4.4% -0.9% -3.8% -2.9% -0.7% 0.9% 11.3% -6.8% 9.2% -7.8%
Record high price* 5,405 4,539 26,884 3,961 7,305 4,143 175,231 1,248 234,639 7,701
Record high
date* 29-Jan-
2026 02-Mar-
2026 02-Mar-
2026 02-Mar-
2026 29-Jan-
2026 29-Jan-
2026 29-Jan-
2026 29-Jan-
2026 29-Jan-
2026 29-Jan-
2026
*Data as of 30 September 2026.
Source: Bloomberg, World Gold Council

Go with the flow
UK gold ETFs saw a surge in demand in Q3; a simple model would have predicted only 18 of the 54 tonnes recorded, leaving an excess of 36t
Historical macro relationships do not explain the excess, but a recent shift suggests fiscal concerns could be playing a role
Unlike the UK-specific gilt crisis of 2022, the current rise in yields is global, raising broader questions about what investors believe higher bond yields are signalling.
Rising government bond yields have generated intense debate this year. Explanations range from stronger growth and a return to historical norms, to fiscal risk and a weakening safe-haven premium. Europe’s surge in gold ETF inflows, led by the UK and exceeding US inflows over the past three months, suggests some investors may see the rise in yields as a warning rather than a healthy normalisation (Chart 2).

Chart 2: Cumulative European flows impress
Cumulative ETF flows in 2026 for selected countries*

Open GMC Sept 2026: Chart 2 configuration options
Sources: Bloomberg, ETF providers, World Gold Council; Disclaimer

*Data to 30 September 2026.

Out of the ordinary
UK gold ETFs recorded exceptionally strong inflows in Q3. Alongside solid demand in France and Germany, this lifted European inflows above North American inflows and resulted in the first positive-flow quarter since 2021.

UK-listed gold ETFs attracted 54t in Q3 with inflows in 12 of the 13 weeks to 25 September. Their persistence points to a sustained shift in demand rather than a response to a single event.

A simple model based on the past five-year relationship between UK and Western (US and Europe ex UK) ETF flows would have predicted Q3 inflows of around 18t, compared with the 54t recorded. The resulting 36t excess is particularly striking given that UK-listed funds represent only around one-third of Western gold ETF assets (Chart 3).

Chart 3: Reason for UK ETF flows is not easy to pin down
Actual, predicted and residual flows*

Open GMC Sept 2026: Chart 3 configuration options
Sources: Bloomberg, ETF providers, World Gold Council; Disclaimer

*Weekly (Fri–Fri) data, Jan-2021 to Sep-2026. Flows model: UK ETF flows regressed on US and Europe ex-UK ETF flows (estimated through 30 Jun 2026). Full model: flows model plus UK 30-year Gilt yield Δ, UK term premium Δ, UK CDS Δ, GBP/USD return, UK news index Δ, MSCI UK equities relative to MSCI world and lagged gold return (USD). Excess flows = actual less model-implied flows. R²: 0.18 and 0.25, respectively. Only significant variable was Europe ex UK flows.

Could local economic stress explain the divergence? Adding measures of UK policy uncertainty, relative equity market performance, currency moves, credit risk, government bond yields and term premium to the five-year model does little to close the gap; historically, their relationships with excess UK ETF flows have been weak and inconsistent.

But one relationship stands out over the period since July: excess UK gold ETF flows have moved alongside the UK term premium (Chart 4). The relationship was weak before July but has strengthened markedly since, suggesting that rising term premia, and the inflation or fiscal risks they reflect, may now be influencing UK gold ETF demand.

The sample is short, but the relationship is consistent with investor response to inflation uncertainty, fiscal concerns or the risk that the Bank of England is behind the curve.

Chart 4: Fiscal concerns may explain the excess flows
Correlation between excess UK flows and macro variables*

Open GMC Sept 2026: Chart 4 configuration options
Sources: Bloomberg, ETF providers, World Gold Council; Disclaimer

*Correlation between weekly UK ETF flows in excess of that suggested by a model on Western flows and selected UK macro variables. UK daily news index. UK relative equity performance: MSCI UK / MSCI World. UK CDS: 5-year Senior Credit Default Swap in bps. UK term premium: Bloomberg Economics 10-year gilt ACM.