Goldman Sachs has found that gold futures suffered a cumulative $19.5 billion in net speculative selling over five consecutive weeks, with roughly 95% of that flow originating outside the traditional hedge fund community. Traders instead turned to crude oil to wager on war risk. Although large-scale liquidation has already occurred, some non-traditional investors still hold substantial long positions in gold, meaning potential selling pressure has not been fully released. December-delivery gold futures settled at $3,898.90 on October 30, breaking below the $4,000 mark. In the second half of October, gold diverged markedly from traditional safe-haven assets: falling U.S. real yields, weakening equity markets, and rising risks of renewed military conflict in the Middle East all failed to halt the decline in bullion. Behind this selloff, the market's trading logic is shifting.
Brent crude futures climbed to around $118, and the geopolitical risk premium spread along the oil futures curve into deferred contracts, with more and more traders choosing to express war risk directly through crude rather than buying gold. Meanwhile, analysis of U.S. Commodity Futures Trading Commission (CFTC) positioning data by Goldman Sachs analyst Robert Quinn shows that since September 22, gold futures have seen cumulative net speculative selling of about $19.5 billion. In the single week from October 20 to 27 alone, the scale of selling reached $8 billion. More noteworthy is the source of the funds. In the most recent round of selling, Other Reportables and Non-Reportables contributed roughly 95%, while total long positions in the other categories remained at historic highs.
Oil displaces gold as a key vehicle for trading geopolitical risk
The unusual performance of gold in October must first be explained by looking at the oil market. January-delivery Brent crude futures hovered near $118 at one point, reflecting that the market is pricing in a higher risk premium for a renewed escalation of military conflict in the Middle East. What deserves attention is not just the oil price itself, but the trend of this premium spreading into deferred contracts. When the war risk premium extends from near-term delivery contracts to more distant ones, it means the market is no longer worried only about a brief supply disruption, but also about the possibility that supply disturbances, military escalation, and logistical uncertainty will persist for longer. This shift has also affected how investors express geopolitical risk. Traders increasingly prefer to buy crude directly while using gold as a source of liquidity. They may sell gold to fund other investment positions, meet margin requirements, or reduce the overall risk of their portfolios. Although physical crude shipments from the Persian Gulf have largely returned to normal, the oil market still prices in a considerable risk premium for an escalation of military conflict in the Middle East. Alongside this, the inverse relationship between Brent crude and precious metals has become increasingly pronounced. In the past, geopolitical tensions typically drove money into gold and silver; but in the second half of October, crude rose while precious metals remained under pressure. Market performance suggests that if this recent relationship persists, every 10% rise in Brent crude could correspond to a decline of about 4% in gold. This is merely an observation of recent market performance, not a trading rule that can be applied mechanically. Especially given that oil prices have already priced in a large geopolitical risk premium, the correlation could reverse quickly as the underlying environment changes. This also explains why gold did not display the characteristics of a traditional safe-haven asset during this round of Middle East tensions. Crude oil has gradually become an important vehicle for the market to gauge geopolitical risk, while gold has in some trades become a tool for financing and adjusting risk exposure. However, oil prices can only explain part of gold's decline. What truly needs further clarification is exactly which investors are concentrating their selling in gold.
Five weeks of $19.5 billion in net selling, with money outside traditional hedge funds leading the charge
In a report titled "Gold Futures: Five Consecutive Weeks of Speculative Selling," Quinn analyzed CFTC Commitments of Traders data through October 27. The data show that since September 22, gold futures have seen cumulative net speculative selling of about $19.5 billion. The statistical week from October 20 to 27 was especially intense, with Managed Money, Other Reportables, and Non-Reportables together cutting about $8 billion in exposure. Of that $8 billion, $5.2 billion came from closing existing positions, while another $2.8 billion came from newly added short positions. The distinction between the two matters greatly. The former means investors are exiting existing positions, while the latter indicates that some funds have actively turned bearish on gold, rather than merely taking profits after a rally. At a gold price of about $4,000 per ounce, $19.5 billion equates to notional exposure of roughly 150 tonnes of gold. But this is only the notional value of the futures market and does not mean that 150 tonnes of physical gold were actually sold in the market. Looking at positioning changes, speculative gold positions accumulated rapidly during the September price rally, then reversed quickly as gold gave back its gains. What was truly unexpected was the composition of the sellers. The market typically focuses first on hedge funds, commodity trading advisors (CTAs), and leveraged macro trading accounts. These funds are often assumed to be the main sellers when market momentum reverses and prices accelerate downward. But Quinn's data show that in the most recent statistical week, Other Reportables and Non-Reportables contributed about 95% of speculative selling. Among that, the unwinding of long positions in the other category contributed about $4 billion. The Other Reportables classification deserves particular attention. It covers larger market participants that cannot be easily classified as traditional managed money, swap dealers, or commercial hedgers. Such participants may include proprietary trading firms, family offices, and other institutional accounts. However, the CFTC does not disclose the specific identities of these participants in its disaggregated data. This means the selling pressure in the gold market does not come only from traditional hedge funds. Even if the most closely watched speculative accounts have already sharply reduced positions, other investors may still hold sizable long positions. Another data point in Quinn's report further reveals this risk. During October, total long positions in the other category at one point exceeded 20% of total gold futures open interest. As of October 27, that ratio had fallen back to about 18%, but it remained clearly above the 11% to 12% seen earlier this year. In other words, the market has already experienced large-scale liquidation, but the potential overhang of excess positioning has not completely disappeared. Investors need to watch not only whether hedge funds have finished clearing out, but also whether those funds that adjust more slowly will continue to exit. In addition, the CFTC positioning report only reflects positions as of Tuesday, October 27. Gold continued to fall after that. Therefore, the available data can reveal the selling pattern before gold broke below key levels, but cannot accurately capture how much more was liquidated in the final trading days. Subsequent positioning reports will provide more complete information.
Real rates failed to support gold, and the cost of downside protection rose markedly
The performance of traditional macro pricing factors also shows that this gold correction can no longer be explained solely by real rates and dollar moves. Quinn noted that during October 20 to 27, the U.S. 10-year real yield fell 11 basis points, yet gold still declined about 1.6%. Over the same period, Brent crude rose 4.1%, and the dollar strengthened 0.6%. Falling real yields are usually supportive for gold, which generates no interest income, while a stronger dollar and rising oil prices can be headwinds. But in that week, the support from lower real yields failed to offset the shock from other factors. From October 27 to 30, gold fell another 4.3%, Brent crude continued to rise 3.7%, while the dollar and real yields retreated from earlier levels. This combination indicates that market trading is increasingly influenced by positioning adjustments and geopolitical liquidity needs, and the traditional real-rate pricing relationship has temporarily lost its dominant role. Sovereign liquidity management may also be a potential transmission channel of risk. Rising energy prices can increase dollar funding needs for oil-importing countries, while geopolitical instability can change the liquidity preferences of national reserve managers. During the Iran war in March 2026, Turkey sold gold and obtained liquidity through gold-backed swap transactions to defend the Turkish lira. This shows that gold held as a reserve asset can also be mobilized under certain circumstances in exchange for liquidity. However, CFTC positioning data cannot identify whether sovereign institutions participated in futures selling, and Quinn's analysis does not prove that central banks are selling physical gold. This is only a possible risk transmission mechanism, not a confirmed source of selling. It is also necessary to distinguish between structural buying by the official sector and futures liquidation by leveraged funds. Central banks may continue to increase physical gold holdings for long-term reserve allocation needs, while speculative investors may still sell futures on a large scale, depressing market quotes. The investment motives and trading cycles of these two types of funds are not the same. The options market offers another perspective: investors are paying more for gold downside protection. Quinn noted that gold's three-month implied volatility and the standardized 25-delta put-call skew both rose. The latter has reached about the 85th percentile of its range over the past year. This reflects deepening investor concern about downside risks in gold. Previously, when gold was rising, funds were willing to pay a premium to participate in the rally; as the market weakened, investors began to place greater emphasis on guarding against further declines. However, options pricing itself cannot distinguish whether the related trades are intended to purchase downside protection or are speculative bets directly bearish on gold. The Goldman Sachs commodities trading desk's description of last Friday's market activity also shows that investors still lack a clear directional judgment. The desk said some long investors have become worried by the decline in gold prices, while potential buyers are assessing whether current prices represent a buying opportunity, but the degree of direct client participation in trading was relatively limited. Most selling was completed through electronic trading venues, activity on the Chicago Mercantile Exchange (CME) increased markedly, and turnover in the gold ETF, the SPDR Gold Trust (GLD), also rose sharply. The Goldman Sachs commodities trading desk sees $3,850 as the next potential support zone, while acknowledging that the earlier breach of the $3,950 support level was unexpected. The $3,850 level is therefore worth watching, but it does not mean this correction will necessarily end there. To judge whether the selloff is nearing its end, it is still necessary to observe whether selling in gold futures can slow, whether the cost of downside protection in the options market declines, and whether the inverse relationship between oil prices and gold begins to weaken.
Risk warning and disclaimer: Markets carry risk, and investing requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investment based on this article is at one's own risk.
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