Insights 
VT 
Gold prices are on a steady rise, nearing an inevitable increase to $5,000/oz by the end of 2026. Last week, prices reached $4,042/oz, just $276/oz shy of the forecasted $4,318/oz for Q426. As of today, the price has risen further to $4,072/oz. Strong ETF flows and robust central bank buying contribute to this upsurge.
The current rate of ETF flows has exceeded expectations, pushing the forecast higher. Although clarity on hedge fund positions remains uncertain, the surge in ETF flows points to heightened uncertainty levels since the 2024 Trump victory. This relationship between ETF flows and uncertainty is seen as a key driver of current price movements.
Chinese Uncertainty
The Chinese uncertainty index does not reflect recent events like the sweeping export controls on rare earths announced in October. Additionally, the US announced 100% tariffs on Chinese goods, with potential discussions to ease tensions. Despite an 80-100 point drop in uncertainty indices in September, Chinese ETF Gold holdings increased slightly from 189 to 193 tons.
The strong upward momentum in gold, now priced at $4,072 an ounce, suggests a bullish stance is warranted. Persistent uncertainty following the November 2024 election and powerful inflows into gold ETFs are the primary drivers of this trend. We believe this environment favors strategies that capitalize on further price appreciation.
For traders looking to position for the move towards $5,000, buying call options is a direct approach. However, given the heightened uncertainty from last week’s new tariffs and China’s rare earth controls, implied volatility is likely elevated, making these options expensive. A bull call spread could be a more cost-effective strategy to capture upside while limiting the initial cash outlay.
Gold Demand and Market Sentiment
Supporting this view, recent data from the World Gold Council for the week ending October 10th showed global gold ETF inflows of 45 tonnes, a significant acceleration. We’ve also seen the CBOE Gold Volatility Index (GVZ) spike to 28.5, its highest level since the market turmoil of early 2025, reflecting the market’s anxiety. The latest Commitment of Traders report further confirms this, with managed money increasing its net long positions in gold futures for a fourth consecutive week.
We must remain cautious of the abrupt political shifts, especially President Trump’s signal of being open to a trade deal last Friday. A sudden de-escalation in trade tensions could quickly reverse the fear-driven rally and trigger a sharp pullback in gold prices. Therefore, traders might consider protective puts with shorter-term expiries as a hedge against this headline risk.
Underlying the speculative flows is the steady demand from central banks, which we expect to continue its robust pace seen since the early 2020s. This ongoing accumulation serves as a fundamental price floor, reflecting a longer-term global trend of diversifying reserves away from the US dollar. This structural buying provides a solid foundation for the market, even during periods of short-term volatility.
