Gold's Split Screen: Chinese Savers Buy the Dip While Futures Traders Head for the Exits

A 3.6% single-session slide would normally send physical buyers running for cover. Instead, the opposite happened. As gold tumbled on Friday, consumers queued up in Chinese bullion markets such as Shenzhen Shuibei in the final days of October, treating the pullback as an entry point rather than a warning. Their purchases point to durable physical demand — but on their own they do not mark a turning point. What matters is whether that buying can absorb the selling pressure still bearing down on the financial side of the market.

Bars in demand, jewellery under pressure

The composition of Chinese demand has shifted sharply toward investment. According to the China Gold Association, the country's consumption of gold bars and coins climbed 28% in the first half of 2026, while jewellery consumption fell 34%. The two main demand pillars are therefore moving in opposite directions: investment purchases are underpinning the market while the jewellery trade sags. The rush of buying after the price decline should not be read as uniformly strong Chinese demand.

Central banks remain on the bid as well. The World Gold Council reports that China's central bank bought 23 tonnes of gold in September — its largest monthly purchase since October 2023. That official demand met a market still on the back foot. Friday's close of USD 3,875.35 per troy ounce marks the level where physical buyers and sellers are squaring off after the selloff. Chinese purchases have so far done nothing to prevent the recent slide.

Speculative money beats a retreat

On the futures side, the trend has run directly counter to the Chinese buying. Net long positions held by non-commercial traders on the COMEX declined steadily over the five weeks to 13 October. Holdings in SPDR Gold Shares fell by roughly 14.043 tonnes between 30 September and Friday. The divergence matters for investors: physical buying and shrinking speculative positions can occur at the same time, so brisk bar demand alone is not enough to justify a sustained recovery. For that, the pressure from position unwinding would also need to ease.

Gu Fengda of Guosen Futures looks for stabilisation first, followed by a possible rebound to USD 4,200 per troy ounce and USD 4,400 by year-end. He ties a deeper slump to an unexpectedly hawkish reassessment of Fed policy and to geopolitical de-escalation. That is a conditional recovery scenario, not a confirmed bottom — it rests on the key drags not worsening from here.

Why the Friday selloff ran through the rates channel

The trigger for the drop was not gold-specific. Prices came under pressure on Friday as oil prices rose and expectations of further rate hikes built. Higher inflation expectations, Reuters reported, reinforced the prospect of another move by the US Federal Reserve. The knock-on effects of costlier crude weighed on the non-yielding metal even as geopolitical risks ran high. Strong US economic data and the September inflation figures provided the backdrop for the shift in rate expectations.

The lesson for investors is that higher energy prices and geopolitical tension do not automatically support gold. In the market reaction Reuters described, fear of tighter monetary policy dominated. The Fed left its policy corridor at 3.75–4.00% on Thursday, but two members voted for a 0.25 percentage-point increase — hardly a unanimous endorsement of holding steady. Unchanged rates do not mean the threat of further hikes has vanished; Reuters reported on Thursday that expectations of a December move had strengthened. The next meeting of the open market committee is scheduled for 8–9 December 2026, and a hike remains a market expectation rather than a decided step.

Forecasts trimmed, capital draining

The more cautious tone extends beyond a single session. In the Reuters poll published Tuesday, the median forecast for gold in 2026 fell to USD 4,495 per troy ounce from USD 4,509 three months earlier. Reuters cited high US yields, a strong dollar and a prolonged period of elevated rates as the drags. The figure is an estimate, not a guaranteed future price, but its downward revision reinforces the picture of a market in which the rates burden carries more weight.

The World Gold Council reported net outflows of USD 1.2 billion from physically backed gold ETFs in the week to 23 October. At the same time the industry body flagged elevated geopolitical and market risks, with Middle East tensions driving oil prices higher. That leaves gold caught in a bind: the risks persist, but their inflationary consequences can sharpen rate worries — precisely the dynamic that shaped Friday's decline.

Long-term insurance, short-term risk

Goldman Sachs continues to recommend gold as portfolio insurance against global growth risks in 2027 and expects a price of USD 5,400 per troy ounce by the end of that year. That long-horizon view does not conflict with near-term pullback risk.

For the coming trading week, the US midterm elections on 3 November and the October jobs report on 6 November are the key calendar markers. Weak employment data could dampen expectations of further rate increases. Chinese buying thus provides a counterweight to position unwinding, but no all-clear. A durable recovery requires physical demand and fading selling pressure to arrive together — and so far, only the first of those two conditions is visible.