Today's Edition
A. SREENIVSA REDDY (ABU DHABI)
Gold finished September at $4,176 an ounce, down 8.5% month-on-month, following a surge in US Treasury yields and the US dollar alongside a decline in futures positions, the World Gold Council (WGC) said in its monthly report.
The decline came despite strong investment demand through gold exchange-traded funds (ETFs). Global physically backed gold ETFs attracted $10 billion in September, capping a record quarter in which investors added $31 billion, according to a separate WGC report.
Gold was down 4.4% in US dollar terms since the beginning of the year, according to the WGC's price data as of September 30. The precious metal had reached a record high of $5,405 an ounce on January 29, 2026, before retreating in subsequent months.
The WGC said the US 10-year Treasury yield climbed 53 basis points to 5.3% in September, while the US dollar index rose 2%. Both developments contributed to the decline in gold prices.
Selling pressure in the gold futures market also contributed to the decline. Hedge funds and other professional money managers reduced their net bullish positions by $12 billion, equivalent to 84 tonnes, during September, the WGC said.
Positions involving offsetting purchases and sales of futures contracts, typically with different expiry dates, also declined by $22 billion, or 156 tonnes. However, the implications of this reduction for gold prices were less clear.
The WGC said the contrasting trends in ETF investment and futures positioning highlighted a divergence between the two markets.
Despite the price decline, global gold ETF holdings increased by 67 tonnes in September to a record 4,256 tonnes. However, their combined assets under management fell 7% month-on-month to $574 billion because of the lower gold price.
During the third quarter, global gold ETF holdings rose by 211 tonnes, while assets under management increased by 9%.
North American gold ETFs attracted approximately $4 billion in September, taking their third-quarter inflows to $12 billion. US-listed funds accounted for most of the monthly investment, attracting $3.8 billion.
European funds recorded inflows of $3.6 billion during September, bringing their third-quarter total to a record $14 billion. Investment was led by UK-listed funds, while Germany and France also recorded inflows.
Asian gold ETFs attracted $2.3 billion in September, marking their third consecutive month of inflows. Their third-quarter inflows reached $4.9 billion.
China remained the largest contributor to Asian inflows, while India, Japan, South Korea, and Singapore also recorded positive investment flows.
The WGC said persistent inflation, elevated energy prices, concerns over equity valuations and volatility in bond markets may have reinforced gold's appeal as a portfolio diversifier, despite the decline in prices.
The council also noted that some investors appeared to view the price correction as an opportunity to increase or maintain their gold holdings.
Meanwhile, global gold trading volumes edged down 2% month-on-month to an average of $423 billion a day in September. Over-the-counter trading volumes rose 1% to $229 billion a day, while exchange-traded volumes declined 4% to $187 billion a day.
Commenting on the rise in gold ETF inflows despite falling prices, Dhaval Jasani, financial markets researcher and Chartered Accountant, said “September's fall in gold is a reminder that price and conviction don't always move together.”
A rise in bond yields and a stronger dollar increased the opportunity cost of holding gold, a non-yielding asset, he said.
“Speculative money responded quickly, with hedge funds cutting net long positions. But long-term investors did the opposite,” Jasani said.
He noted that futures positioning tends to influence short-term gold prices, while accumulation through physically backed gold ETFs reflects longer-term investment strategies, including hedging against persistent inflation, high energy costs and stretched equity valuations.
“Institutions see the correction as a buying opportunity, not a change in thesis,” he said.
Jasani suggested that investors in the UAE and globally could accumulate gold in a phased manner while monitoring real yields.
“When central banks around the world are buying gold instead of holding currencies as reserves, the message is clear. Gold is insurance, and you don't cancel insurance because the premium dipped,” he added.
