Happy Tuesday, GoldBuzzers!

Kitco's weekly survey has Wall Street analysts split almost evenly between bulls and bears at the moment, and the retail crowd has lost its bullish lean for the first time in months. So this week's Take Action Tuesday looks at a question I've had in my inbox more than once since the summer: if gold keeps falling, who's doing the selling?

The answer turns out to be more useful than it sounds, because the people selling aren't the people you might expect, and the people buying tell you something about how to handle a pullback like this one.

Ok. Let’s get into it. ⬇️

Gold went nowhere on Monday, settling just under $4,150 an ounce and still pinned near two-month lows, while silver managed a modest gain of a little over one percent. The pressure on gold hasn't changed: the dollar sits at its strongest since April 2025, helped along by a soft euro as France's bond troubles rumble on, and the 10-year Treasury yield touched 5.35 percent on Monday, a level last seen in 2002, as the global bond selloff continued.

What's keeping the metals supported is the Fed. September's jobs report showed just 29,000 new positions against roughly 90,000 expected, and markets now see about an 80 percent chance the Fed leaves rates alone this month.

A December hike is still very much on the table, though, with services-sector cost pressures rising at their fastest pace in more than four years and oil holding above $100 a barrel. For now, gold is doing exactly what a consolidation phase looks like.

Two numbers landed last week that don't quite fit together, and the gap between them is the subject of today’s feature.

The first came from Bloomberg. Gold ETFs added 143,200 ounces in a single session last week, their fifth straight day of buying, taking total holdings to 100.9 million ounces. That's the highest since August 2022, and it happened while gold was down on the year and sliding for a fifth week.

The second came from the CFTC, the US regulator that publishes who holds what in the futures market every Friday. Hedge funds cut their bets on a rising gold price for the fifth week running. Their net position stood at 387 tonnes on 29 September, down 18 percent from 471 tonnes five weeks earlier. Gold fell 10 percent over the same stretch.

So one group of investors has been buying into the decline and another has been selling into it. The question is which group you belong to.

Who's selling, and why they have to

Hedge funds trade gold through futures contracts, and most of them do it with borrowed money. A futures position controls far more gold than the cash put up to hold it, which is wonderful when the price rises and brutal when it falls. As gold drops, the broker asks for more cash, and if the fund would rather not pay, the position gets closed. Multiply that across hundreds of funds and you get five weeks of selling that has nothing to do with anyone's view on gold's long-term value.

ETF investors sit on the other side of that arrangement. When you buy a share of a gold ETF, you pay in full and own a slice of metal in a vault. Nobody calls to ask for more cash when the price falls, so nobody is forced out. That's why the ETF holdings kept rising while the futures crowd was heading for the exit.

Incidentally, if you hold a leveraged mining fund, the kind that promises two or three times the daily move, you're in the hedge fund crowd whether you intended to be or not. Those funds reset every day, so a 20 percent fall followed by a 20 percent recovery in a 2x fund leaves you down 4 percent, and in a five-week slide that cost really compounds.

The chart shows the three lines together since July. The middle panel peaks on 25 August and then slides. The bottom panel, which tracks gold held by the largest gold ETF, barely moves. Those are the two crowds.

The crowd that missed the top

Pull back to the whole of 2026 and the hedge fund line gets even more interesting.

On 24 February, gold closed at $5,140, within sight of its record. The hedge funds held 311 tonnes that day, below their five-year average. They'd been cutting since late January, straight through the strongest part of the rally.

Six months later, on 25 August, gold was almost $500 lower at $4,658 and the hedge funds held 471 tonnes, their biggest position of the year. They were lightest near the top and heaviest well below it, and the five weeks since have cost them a fifth of that position.

That isn't a knock on hedge funds. Trend-following money is built to chase moves and cut losses fast, and over a career it works for many of them. It's just the wrong model for anyone buying gold to hold for years.

Does ETF buying into weakness mean anything?

Not on its own, and it's worth being honest about that. A year ago this month, Bloomberg ran almost the same story: ETF holdings at a three-year high on the day gold had its worst single-day fall since 2013.

Gold then rose 31 percent to January's record. But in 2020, holdings in the largest gold ETF hit their peak six weeks after that year's price top and then shrank by 29 percent over two years. Patient money is patient, and it can be patient at the wrong moment.

What the data does tell you is that this correction isn't being driven by long-term holders giving up. It's leveraged money being squeezed out, and leveraged money comes back.

What to do with it

Pull back far enough and the five weeks disappear. Gold is still up more than 60 percent on where it stood two years ago, the world's gold ETFs hold more metal than at any point in history, and central banks told the LBMA conference this week they aren't done buying. The hedge funds will be back once the trend turns, as they always are, and their buying will push the price up for everyone who held through the squeeze.

I've said since the March 2024 breakout that this bull market will take gold past $10,000, and nothing in the past five weeks has changed that. Leveraged money being shaken out is what a consolidation looks like inside a bull market that still has years to run.

That’s all for this Tuesday, folks. I’ll see you on Thursday.

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Rick Adams
Founder, GoldBuzz
rick@goldbuzz.com