Goldman Sachs: Recent Gold Selloff Mainly Driven by Large-Scale Speculative Liquidation, Not Real Rate Changes

Nov. 8 — According to Zhitong Finance, Goldman Sachs analysis indicates that the main reason for the recent sustained decline in gold prices is large-scale liquidation by speculative funds, rather than changes in real interest rates. U.S. Commodity Futures Trading Commission (CFTC) data shows that between Oct. 20 and Oct. 27, speculative traders net sold about $8 billion of gold positions, of which $5.2 billion came from long liquidation and $2.8 billion from new shorts. Since Sept. 22, the gold market has seen five consecutive weeks of net speculative outflows, totaling $19.5 billion.

Goldman Sachs noted that between Oct. 20 and Oct. 27, about 95% of the outflows came from "other traders" and non-reportable traders, and as of Oct. 27, the long positions of such investors were still above the median of the past two years, meaning there remains a risk of further liquidation ahead. Between Oct. 27 and Oct. 30, gold fell another 4.3%, and put bets and downside hedging demand in the options market also increased noticeably, indicating that short-term bearish sentiment in the market continues to build.