Gold prices are steadily rising and are likely to reach $5,000 per ounce by the end of 2026. Last week, prices hit $4,042 per ounce, only $276 short of the forecasted $4,318 for Q426. Today, the price has increased further to $4,072 per ounce. This rise is fueled by strong ETF inflows and active buying from central banks. The current ETF flows have surpassed expectations, leading to a higher forecast. While hedge fund positions are unclear, the increase in ETF flows indicates growing uncertainty since the 2024 Trump victory. This connection between ETF flows and uncertainty is a key factor influencing prices.

Chinese Uncertainty

The Chinese uncertainty index does not account for recent events, including the sweeping export controls on rare earths announced in October. Additionally, the US has imposed a 100% tariff on Chinese goods, although there are discussions to ease tensions. Despite an 80-100 point drop in uncertainty indices in September, Chinese ETF gold holdings rose slightly from 189 to 193 tons. With gold now priced at $4,072 an ounce, the strong upward trend suggests a bullish outlook. Continuous uncertainty following the November 2024 election and significant inflows into gold ETFs drive this momentum. We believe this environment supports strategies aimed at capturing further price gains. For traders preparing for a move towards $5,000, buying call options is a straightforward approach. However, due to the increased uncertainty from last week’s new tariffs and China’s rare earth controls, implied volatility is likely high, making these options pricey. A bull call spread may be a more cost-effective way to benefit from potential gains while minimizing initial expenses.

Gold Demand and Market Sentiment

Supporting this outlook, recent data from the World Gold Council for the week ending October 10th shows global gold ETF inflows of 45 tonnes, a notable increase. The CBOE Gold Volatility Index (GVZ) has surged to 28.5, its highest level since the early market turmoil of 2025, reflecting market anxiety. The latest Commitment of Traders report confirms this, indicating that managed money has increased its net long positions in gold futures for the fourth straight week. We need to be cautious about sudden political changes, especially President Trump’s indication last Friday of being open to a trade deal. A quick de-escalation in trade tensions could reverse the current fear-driven rally and lead to a sharp decline in gold prices. Therefore, traders may want to consider protective puts with shorter expirations as a safeguard against this risk. Underlying the speculative flows is solid demand from central banks, which we expect to maintain the strong pace seen since the early 2020s. This ongoing accumulation provides a fundamental price floor and represents a longer-term global trend of diversifying reserves away from the US dollar. This consistent buying strengthens the market, even amidst short-term volatility. Create your live VT Markets account and start trading now.

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