Momentum Accelerates as Investment Demand Surges

Gold extended its historic rally this week, crossing the US$4,000/oz threshold for the first time, driven by robust investment flows in both Western and Asian markets. In China, gold’s momentum intensified, with the Shanghai Benchmark Gold Price (SHAUPM) rising 12% last month and marking its strongest year-to-date performance on record. Gold withdrawals from the Shanghai Gold Exchange rebounded to 118 tonnes in September as bar and coin demand resurged, while Chinese gold ETFs saw RMB4.5bn (US$622mn) in inflows the first monthly increase this quarter reversing earlier losses. The People’s Bank of China continued its strategic accumulation, adding 1.2 tonnes in September, its eleventh consecutive month of purchases. 

In India, the festive and wedding seasons ignited a sharp rise in physical demand, despite record high prices. Domestic gold traded at a premium of US$25/oz over international prices, reflecting strong consumption. Indian gold ETFs saw their largest inflows on record in September, with INR83.6bn (US$947mn) of net buying, as investors sought protection against currency weakness and inflation. Investment demand has now overtaken jewelry as the dominant driver of market flows, signaling a structural shift in sentiment. 

Globally, gold has risen 58% year-to-date the fastest annual pace since 1979 amid rising geopolitical tension, a weakening U.S. dollar, and expectations of policy easing from the Federal Reserve. With gold now more than 20% above its 200-day moving average, technical indicators point to an overbought market. However, strong central bank buying, persistent ETF inflows, and a broadening investor base suggest the strategic uptrend remains firmly intact.