Gold fell 8.5 percent in September, to $4,176 an ounce, by the World Gold Council’s measure. A fall of that size usually means holders are leaving. This time the people who hold the metal did the opposite. Funds backed by physical gold took in $10 billion during the month and ended it with a record 4,256 tonnes. China’s central bank bought about 740,000 ounces, its largest monthly purchase in roughly three years. Both groups owned more gold on September 30 than on September 1, and the price was 8.5 percent lower. So who sold?
The answer is in the futures market, and it matters beyond one month. It explains how a price can fall while ownership rises. It also gives a first answer to a question we left open in September, when we asked whether the Western investors who came back to gold in August would stay once the price turned against them.
What happened to the price
The trigger was the Federal Reserve. On September 16 it raised interest rates for the first time since 2023, by a quarter point to a range of 3.75 to 4 percent. The vote was 12–0, and 16 of its 18 officials projected at least one more increase before the end of the year. Gold dipped on the announcement and recovered within days.
The damage came afterwards, in the bond market. The yield on the 10-year Treasury climbed from 4.75 percent at the end of August to 5.29 percent at the end of September, and on October 5 it reached 5.31 percent, its highest since 2002. The yield after inflation rose by half a percentage point in the month, to its highest level since 2008. That real yield is what an investor gives up by holding a metal that pays nothing. The dollar gained about 2 percent. Each of those is a headwind for gold, and all three arrived together. What earlier rate-hiking cycles did to gold is the subject of a companion long read, The Fed Is Hiking Again. Gold Has Been Here Before.
Who sold
Gold has two kinds of market. In one, investors own metal, either directly or through funds that keep bars in a vault. In the other, traders buy and sell futures contracts on New York’s COMEX exchange. A futures contract is a leveraged bet on the price. The trader puts up a fraction of the contract’s value and rarely takes delivery of any gold. When the price moves the wrong way, or borrowing gets more expensive, that trader can be forced out quickly.
The futures market is where September’s selling was. Net long positions on COMEX, meaning the balance of bets on a higher price, fell by 100 tonnes, or 13 percent, to 654 tonnes. Most of the drop came from the category regulators call managed money, which is largely hedge funds and other professional speculators. Their net position fell by 84 tonnes, worth about $12 billion. Traders also closed 156 tonnes of spread positions, which pair a bet on one delivery month against a bet on another.
Key Data
Gold: down 8.5% in September to $4,176/oz on the London benchmark (futures settled 6.6% lower), and down 4.4% for the year to date. Fed: up a quarter point to 3.75–4.00% on September 16, by 12–0. 10-year Treasury yield: 4.75% to 5.29% in the month; the real yield went from 2.44% to 2.93%, the highest since 2008. COMEX futures: net longs down 100t to 654t; managed money down 84t (about $12 billion) to 387t. Gold funds: $10 billion and 67t of inflows in September, to a record 4,256t; a record $31 billion in the third quarter; assets down 7% to $574 billion. People’s Bank of China: about 740,000 oz (roughly 23t), a 23rd straight month of buying.
Who bought
The buying came from every region, and it was strongest in the West. North American funds took in $4 billion in September and $12 billion over the third quarter, their first quarterly inflow of the year. European funds took in $3.6 billion in the month and a record $14 billion in the quarter, more than North America for the first time since 2021. Asian funds added $2.3 billion, their third monthly inflow in a row. In total the third quarter brought $31 billion into gold funds, the most on record.
One country stands out. UK-listed funds had their strongest quarter ever, with $7.5 billion of inflows and net buying in 12 of the 13 weeks to late September. Britain is now the largest single-country source of gold-fund inflows this year, slightly ahead of China. The World Gold Council ties that buying to worries about British government debt and inflation, not to any view on the Fed, which matches what we found behind August’s rally. The Council also reads the pattern as a warning about bond markets more than a vote of confidence in gold, and it notes that its evidence so far covers only a few months.
Then there is the official sector. The People’s Bank of China added to its reserves for a 23rd consecutive month, and it bought more in September’s falling market than it had in August’s rising one. A reserve manager building a position over decades treats a lower price as a better entry.
Why the price fell anyway
If the people who own gold were buying, why did the price fall? Because a price is set by whoever is most urgent, and in September that was the futures seller. A fund investor adding to a long-term holding buys steadily and can wait. A leveraged trader facing higher interest rates and a falling price has to sell now. Futures are also where gold’s price is discovered from minute to minute, so pressure there shows up in the quoted price at once. The slow accumulation of bars in vaults does not.
The tonnage makes the point, with one caveat. Roughly 100 tonnes of net bets left the futures market. Funds added 67 tonnes, and China’s central bank alone reported about 23. Those figures are not two sides of one ledger. Most gold changes hands in London’s over-the-counter market, which reports far less, and the figures leave out other central banks and private buyers of bars and coins. But the numbers we do have point the same way. The selling was concentrated among holders of contracts, and the buying among holders of metal.
What this does and doesn’t tell you
It would be easy to make too much of this. A fall driven by speculators is still a fall, and it may not be over. Three cautions apply.
First, fund investors are not permanent holders. Gold funds worldwide lost almost $9 billion in June alone. In 2022 and 2023, when real yields rose for far longer than a month, gold funds lost metal in both years. One strong quarter in a falling market is evidence of conviction, and it falls short of proof.
Second, the force behind the futures selling has not gone away. Real yields are near an 18-year high, and most Fed officials expect to raise rates again this year. If yields keep climbing, speculators have more to sell. Managed-money positions are still net long by 387 tonnes.
Third, flows into funds measure demand, not value. Investors can keep buying an asset that keeps falling.
What the September numbers do establish is narrower. In July we described the gold market as two kinds of buyer keeping different time, and warned that the costly mistake is to buy for the long-term holder’s reasons and then sell on the trader’s reflex. September put that to the test, and the long-term holders held.
For anyone weighing their own position, the practical reading is this. The price quoted each day is set largely by traders whose horizon is weeks and whose main input is the interest rate. If that is your horizon too, September’s message is that rates are still in charge. If you hold gold for the reasons the funds and central banks gave this summer, which were doubts about government debt, currencies and inflation, then the month’s most important number was 4,256 tonnes, not $4,176.
More evidence arrives soon. September’s inflation figures are due on October 14 and the Fed’s next decision on October 28, and the World Gold Council’s full account of third-quarter demand follows. Our gold reserves cluster shows who the official buyers are, nation by nation.
