Gold ETFs Face Turning Point as Prices Dip Below $4,300; Net Outflows Near $900M in Two Days

By Special Correspondent Pang Huawei, 21st Century Business Herald

From September 23 to 25, London spot gold closed below the $4,300/oz mark for three consecutive days. This marks a shift in sentiment for domestic gold ETF investors, who had previously been buying on dips but turned to net selling on September 23 and 24.

Is this a short-term correction or a trend reversal? Who is buying the dip, and who is taking profits? Can investors still "get on board" with gold?

A Roller-Coaster Ride

The gold market has been anything but calm over the past month.

The recent peak came on August 25, when London spot gold hit $4,697/oz, a three-month high. August saw cumulative gains of over 15%.

The tide turned after Federal Reserve Chair Walsh delivered his first keynote address as Chair at the Jackson Hole Global Central Bank Symposium, sending a clear hawkish signal. Expectations of a September rate hike intensified, prompting many investors to take profits. International gold prices plunged 7.08% in just five trading days from August 26 to September 1. Prices then entered a consolidation phase, oscillating between $4,200/oz and $4,400/oz.

The real drama unfolded on September 16, when the Federal Reserve raised the federal funds rate target range by 25 basis points to 3.75%–4.00% — the first rate hike since July 2023 and the first in over three years. London spot gold closed at $4,263/oz that day. However, prices rebounded over the next two sessions, not only recovering all losses but posting a weekly gain of approximately 0.68%.

This resilience — a "bad news is good news" phenomenon — was largely attributed to the market having already priced in the rate hike. Once the hike was announced, gold prices found a floor and stabilized. At that point, geopolitical factors became the dominant short-term driver: ongoing conflicts shifted gold's price catalyst from direct safe-haven demand to a "oil price → inflation → interest rate" transmission chain.

However, on September 23, the 10-year U.S. Treasury yield surged 15 basis points in a single day to around 5.11%. Concerns about entering a rate hike cycle further pressured gold prices.

London spot gold closed at $4,286/oz on September 23, $4,274/oz on September 24, and $4,284/oz on September 25 — breaking through the $4,300/oz threshold for three consecutive days.

The End of "Buying the Dip"?

Fund flows tell a clear story:

• During the gold price correction in May and June, China's 14 gold ETFs saw net outflows of over 23 billion yuan.
• As prices recovered from July onward, funds flowed back in, pushing total AUM above 260 billion yuan, and above 280 billion yuan by the end of August.

September brought a new dynamic. Early in the month, price volatility did not scare off investors; instead, it triggered a wave of "buying the dip." But when prices rapidly broke below $4,300/oz, funds shifted to net selling.

According to Wind data, as of September 22, the total shares of the 14 gold ETFs reached 31.573 billion units, an all-time high — up 22.65% from the start of the year and a net increase of 1.317 billion units (4.35%) from the beginning of September.

The turning point came on September 23 and 24. Over these two days, total shares of the 14 gold ETFs decreased by 0.023 billion and 0.101 billion units respectively. As of September 24, total shares stood at 31.449 billion units. On September 23, with London spot gold at $4,286/oz, net redemption outflows reached 198 million yuan. On September 24, as gold fell further to $4,274/oz, net outflows expanded to 699 million yuan.

In terms of scale, as of September 24, the total AUM of China's 14 gold ETFs was 284.732 billion yuan. Year-to-date, commodity-type gold ETFs have seen their AUM increase by 39.917 billion yuan, or 16.53%. This includes net subscription inflows of 65.561 billion yuan, offset by a 25.644 billion yuan reduction due to price declines. Since September, gold ETF AUM has decreased by 209 million yuan, comprising net subscription inflows of 10.641 billion yuan and a price-driven reduction of 10.851 billion yuan.

This data indicates that despite the overall decline in gold prices since September, investors have been actively buying, with buying intensity increasing through the second half of the year:

• July: net subscription inflows of 5.065 billion yuan
• August: net subscription inflows of 10.377 billion yuan
• September (through the 24th): net subscription inflows of 10.641 billion yuan

This buying trend is not unique to China. Data from the World Gold Council shows that global gold ETFs saw net inflows of approximately $18 billion in August, the second-largest monthly inflow on record. Total AUM reached $615 billion, and holdings increased by 121 tonnes to 4,189 tonnes — both all-time highs.

A fund manager from South China analyzed that gold investors generally fall into two categories:

1. Trading-oriented investors (e.g., fund managers, retail investors) who aim to profit from short-term price movements.
2. Asset allocation investors (e.g., central banks) who buy on dips and hold for the long term.

These two groups operate on different rhythms. If the short-term outlook is bearish, the former may sell to lock in profits, while the latter, focused on medium-to-long-term trends, will accumulate at lower prices — the lower the price, the more they buy.

Institutional Outlook: Short-Term Rates, Long-Term Credit

Institutions present a bifurcated outlook: cautious in the short term, optimistic in the long term.

Short-Term: Interest Rates Remain Key

Most analysts believe that the Fed's dot plot, which signals another rate hike this year, along with elevated real interest rates, will continue to cap gold's upside. In the near term, the co-movement of the U.S. dollar and real rates remains the dominant driver of gold prices.

Jianxin Futures noted in recent precious metals daily reports that both the Middle East situation and the Fed's monetary policy outlook carry significant uncertainty, leading to high volatility in precious metals. Their recommendation: allocation-oriented investors should continue to overweight gold via dollar-cost averaging, while trading-oriented investors should adopt a wide-range trading approach and look for buying opportunities on pullbacks.

Medium-to-Long Term: Supportive Logic Intact

The fundamental case for gold remains unshaken. Recent institutional research reports show:

• Goldman Sachs maintains its year-end 2027 target of $5,400/oz but has lowered its year-end 2026 fair value estimate from $4,900/oz to $4,650/oz.
• UBS maintains a bullish view on gold over the next 12 months, with year-end 2026 and September 2027 targets of $4,600/oz and $5,400/oz, respectively.

The core logic: gold's pricing anchor is shifting from real interest rates to the sustainability of U.S. debt. The market's main trading theme has moved from traditional interest rate logic to credit logic. Gold is evolving from an "inflation hedge" to a "sovereign credit hedge."

Notably, U.S. federal government debt has surpassed $40 trillion, with annual interest payments of approximately $1.2 trillion. Net interest payments as a share of fiscal revenue have reached 18.5%, exceeding the historical peak of 1991. This is eroding investor confidence in U.S. Treasuries, prompting allocations to gold as a hedge against credit risk.

Central Bank Buying Provides a Floor

Global central banks continue to accumulate gold, providing medium-to-long-term support:

• As of the end of August 2026, China's gold reserves stood at 76.73 million ounces, a month-on-month increase of 650,000 ounces — marking 22 consecutive months of accumulation. The August increase was the largest since the resumption of purchases in November 2024.
• According to the World Gold Council, global central banks and related institutions added a net 289 tonnes of gold in Q2 2026, up 62% year-on-year.

The underlying logic: over the long term, the weakening of the U.S. dollar's creditworthiness and rising credit risk enhance gold's appeal as a portfolio asset.

Can You Still "Get on Board" with Gold?

Institutions offer three answers, depending on the question:

"Should I chase the rally now?"

A fund manager from South China: "Short-term gold price movements are difficult to predict." The reasoning: expectations of further rate hikes and ongoing geopolitical disruptions mean gold is likely to remain volatile.

"Should I allocate during the pullback?"

Many institutions give a relatively positive response:

• GF Fund recommends "buying on dips with diversified allocation," arguing that as the rate hike overhang clears, gold may present a favorable entry window.
• Bosera Asset Management's gold ETF manager Wang Xiang advises "focusing on allocation opportunities during the correction," placing this within a medium-term framework.
• UBS, in a September 9 report, characterized the pullback as a "strategic building window, not a signal to retreat," recommending that underweight investors use the weakness to establish strategic long positions.

The common premise: investors should view gold as a medium-to-long-term asset allocation tool, not a vehicle for short-term speculation. One fund manager noted that every pullback triggered by rate hike expectations may offer an entry point for allocation-oriented capital.

Institutions generally advise ordinary investors to treat gold as a "tail-risk hedge + USD credit/fiscal risk hedge" for their medium-to-long-term core holdings, rather than a short-term trading instrument. A suggested allocation is 10%–20% of a portfolio in gold-related assets, built gradually on pullbacks.

"Should I make a heavy bet now?"

Almost no institution gives a positive answer. Some industry insiders warn of downside risks under an extreme hawkish scenario: if the Fed surprises with additional rate hikes before year-end and signals a higher terminal rate, gold could fall to lower levels. In a period of high uncertainty over the rate path, phased buying and position sizing are widely recommended.