Brent crude plunged roughly 20% in a single week, yet gold rebounded more than 3% in tandem — Goldman Sachs argues this is no coincidence, but rather the concentrated expression of a pricing mechanism that has persisted throughout the year.
On Wednesday, crude fell 9% in one session, while gold posted its largest single-day gain since August, rising more than 3% to around $4,130 per ounce.
Gold and oil diverged this week.
Goldman Sachs trader Rich Privorotsky proposed in his latest morning note that gold has evolved into a "mirror trade" of crude oil: central banks in energy-importing nations had previously been forced to sell gold to pay soaring oil bills, and as oil prices retreat, this mandatory selling pressure fades at the margin, giving gold immediate support.
This mechanism simultaneously explains a paradox that has long puzzled the market: during the period of peak geopolitical risk this year, gold did not serve as a "safe-haven asset" but instead fell sharply from a January high above $5,600 to below $4,000.
Since the start of the year, the gold-oil correlation has been predominantly negative. The 20-day gold-oil correlation coefficient reached an unusually high -0.6 at one point, compared with approximately +0.6 before the US-Iran conflict.
Gold-oil 20-day correlation coefficient is currently around -0.60, within the year's low range.
Under Goldman Sachs' framework, the marginal seller of gold in 2026 is precisely those oil-importing nations in urgent need of dollars. When oil prices fall, dollar pressure eases, and selling momentum weakens accordingly.
Who Is Raiding the "Savings Jar"
Turkey is the most representative case.
Within two weeks of the war's outbreak, Turkey sold 58 tonnes of gold, using the dollar proceeds to simultaneously support the lira and pay sharply rising energy import bills; in the following week, cumulative sales doubled, equivalent to roughly 15% of its entire gold reserves. Turkey recorded its largest single-month decline in foreign exchange reserves on record in March, while nearly emptying its holdings of US Treasuries during the same period.
Turkey's sell-off at the time was equivalent to roughly 15% of its entire gold stockpile — matching the reserves it had accumulated over the past six years.
Turkey is not an isolated case. In March, global central banks as a whole turned net sellers of gold for the first time in nearly ten months; Russia also sold gold to fill fiscal gaps, while Poland and China maintained net purchases.
Adam Gillard, a commodities researcher at Goldman Sachs, noted that concentrated selling by Turkey and other emerging market economies was the direct trigger for gold's plunge of more than $1,000 from its pre-war high.
Oil Is Already Pricing In "Peace"
Privorotsky also pointed out that crude has already front-loaded a great deal of positive news.
The Brent forward contract spread has shifted back into contango structure for the first time since mid-July, a structurally bearish signal indicating that the market expects Middle Eastern oil supply to continue normalizing. Some analysts believe a reasonable oil price is now below $70.
The Brent forward contract versus spot crude spread has turned negative.
Privorotsky himself admitted he is "somewhat worried" about short-term price action, "a bit concerned the situation is too optimistic, and uncertain whether there will be a weekend escalation." In terms of trade logic:
Continuing to short crude (higher risk): Crude has already fallen 20% in a single week, and chasing shorts now amounts to betting that "peace expectations in the Middle East and other regions will continue to build, and the geopolitical risk premium will further disappear." Any slight change in the situation could easily trigger a retaliatory rebound in crude.
Buying gold (more prudent): Buying gold is betting that "the pressures that forced emerging markets to frantically sell assets this year will not repeat." As long as those pressures do not erupt, gold has support; even if the situation suddenly deteriorates, gold as a safe-haven asset can resist declines.
Nomura strategist Charlie McElligott reached a similar conclusion from a different angle: if Trump's hardline stance on Iran softens, the gold selling pressure from Gulf Cooperation Council countries and Iran could also ease in tandem — the Gulf region was likewise a participant in this round of selling, for reasons identical to Turkey's.
Gold Market Positioning Is Extremely Bearish
Goldman Sachs believes that for investors considering going long gold, the current positioning structure offers a signal worth noting.
Gillard wrote that this round of gold's rebound was primarily driven by CTA short covering and limited-scale Chinese buying, with "no obvious macro fund involvement," and no substantive repositioning yet seen at the institutional level.
Goldman Sachs' CTA positioning indicator has dropped from approximately +4 in late summer to about -7, the lowest level in two years of data.
Gold CTA positioning versus gold price trend comparison.
The ETF level is also under pressure. According to Bloomberg, GLD saw its first net outflow since June this month, amounting to approximately $1.8 billion; Gillard estimates that the average holding cost for GLD and iShares holders is around $4,400 per ounce, roughly 6% above the current price, and the existence of a large volume of trapped positions will create some resistance to the initial rebound.
Gold ETF holders' average cost is around $4,400 per ounce.
Bloomberg macro strategist Simon White noted that last Friday's 3.7% sharp drop in gold "had the typical characteristics of a liquidity-replenishing sell-off," pushing gold below its fair value range for the first time since 2023.
Combining extremely bearish CTA positioning, trapped ETF holders, and absolute levels below fair value, Goldman Sachs analyst James McGeoch noted that the "currency debasement" narrative has returned to market discussion, with open interest rising 1% on Wednesday as longs continued to add positions.
Structural Buying Has Never Left
Meanwhile, structural demand for gold has not actually disappeared.
The latest data from the World Gold Council shows that central bank gold purchases reached 321 tonnes in the third quarter, up 42% year-on-year, the fastest since 2024, with cumulative purchases of 675 tonnes year-to-date, led by the central banks of China and Poland. Gold ETFs recorded a record $31 billion in net inflows in the third quarter, with total holdings rising to an all-time high of 4,256 tonnes.
However, there remains a time lag in the transmission between gold mining stocks and the gold price. Goldman Sachs Australian mining analyst Hugo Nicolaci's team noted that diesel costs remain at the upper end of company guidance, and despite the recent decline in oil prices, fuel costs account for approximately 1%-10% of all-in sustaining costs, leaving short-term margin compression risk.
Goldman Sachs has downgraded ASX-listed Genesis Minerals to Neutral, downgraded Regis Resources to Sell, and noted that the Australian mining sector currently implies a gold price of approximately $3,600 per ounce, below spot and forward prices of over $4,000 — for miners, the inverse oil dividend will only materialize once lower fuel costs are actually reflected in financial reports.
Follow the Oil Bill, Not the Fed
The traditional analytical framework anchors gold to real interest rates and the dollar.
This week, US Treasury yields fell across the curve and the dollar weakened on election results, which indeed constitutes a tailwind, but this framework cannot explain why gold fell sharply when geopolitical risk was at its highest. Oil prices, through the selling behavior of emerging market central banks, have always been the true driver of marginal gold pricing in this cycle.
The gold-oil ratio has returned above 40x.
From here, the market faces two paths:
First, the de-escalation continues, energy bills decline, central banks like Turkey's stop net selling and eventually buy back the gold they previously liquidated, CTAs turn bullish, and the gold price returns toward the $4,400 average and even higher levels;
Second, geopolitical conflict re-escalates, oil prices rebound, and emerging market reserve pressure returns.
Privorotsky believes that going long gold is the "more defensive" de-escalation trade, and also a better hedge against currency debasement. The latter logic lies in the fact that the new Congress is expected to restart fiscal expansion, with a clear upward deficit path — which is precisely the fundamental reason why the term "currency debasement" has returned to market discourse.
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