Gold's Institutional Backstop Holds, but the Wider Buyer Base Is Thinning

Spot gold settled at $3,909.43 an ounce on Tuesday, down 0.9%, as investors weighed midterm election outcomes against a Federal Reserve still leaning toward tighter policy — and against a demand picture that is far more uneven than the headline flows suggest.

The World Gold Council's demand report, released today, draws a sharp line between two gold markets. Physically backed ETFs pulled in 211 tonnes in the third quarter of 2026, lifting their holdings to 4,256 tonnes. Central banks and other official institutions bought a net 321 tonnes over the same period, a 42% jump on the year-earlier quarter and the strongest quarterly total since the final three months of 2024, according to the council.

Strip those two pillars away and the picture darkens. Bar and coin demand fell 19% year on year, while jewellery consumption dropped 17% to 312.9 tonnes. The council responded by cutting its 2026 growth forecast for overall investment demand to 200 tonnes from 400 tonnes, citing the retreat in bar and coin buying, Reuters reported.

A floor, not a broad revival

The distinction matters for anyone reading ETF inflows as a verdict on physical demand. Fund buying and official-sector accumulation are providing support; they are not offsetting the weakness elsewhere, and the council's own downgrade concedes as much. For the year ahead it expects central bank purchases to at least match 2025's 848 tonnes — an expectation rather than a booked order.

Monetary policy is the other half of the equation. The Fed left its target range at 3.75–4% on October 28, and CME FedWatch showed a 73% market-implied probability of a December hike, per Reuters. October's ISM manufacturing PMI came in at 55.5, up from 54.5 in September, reinforcing the case for restraint. ING analysts look for a partial price recovery but see higher rates and a firmer dollar capping gains; cheaper energy alone, in their view, will not be enough to turn the tide.

Washington's fiscal fork

Today's midterms feed into gold through the bond and currency markets rather than directly. A continued Republican hold on Congress could open the door to further tax cuts and higher defence spending, carrying added deficit risk, Reuters noted. Divided control would instead complicate budget talks and sharpen next year's fight over the debt ceiling. Higher Treasury yields might lift the dollar near term; over a longer horizon, widening deficit financing could weigh on it.

Liquidity has been the more immediate force. The recent slide was tied to selling to raise cash, including liquidation of liquid metals to cover margin calls, according to media reports. Yesterday's bounce came from falling oil prices and hopes of diplomatic progress in the Iran conflict, which eased inflation worries — though ING cautions against treating de-escalation as assured.

What to watch

JOLTS job openings land today, eurozone inflation data tomorrow, and the US payrolls report on Friday. Dollar and Treasury reactions to the election will matter more than the result itself. ETF flows and official buying offer a cushion; a broad-based demand recovery is not something the latest report can support.