WGC warns gold market overextended after record ETF demand and $4,000 breakout

Commodity

Summary:

The World Gold Council warned gold’s surge above $4,000 is overextended after record Q3 ETF inflows of 221.7 tonnes, though solid fundamentals and equity volatility may keep prices supported.

The gold market has been unable to hold its recent gains above $4,000 an ounce, and while the market could be susceptible to profit-taking in the short term, it’s difficult to ignore the momentum that has driven prices to record highs, according to the latest commentary from the World Gold Council (WGC).

The WGC published its monthly report on gold-backed exchange-traded funds, which showed record inflows during the third quarter, with September accounting for more than 60% of the activity during the period.

According to the report, 145.6 tonnes of gold flowed into global ETFs last month, valued at more than $17.3 billion. For the quarter, ETF holdings increased by 221.7 tonnes, valued at nearly $26 billion.

The analysts noted that the sharp rise in gold prices pushed the value of assets under management to record highs; meanwhile, physical holdings were less than 2% below the record levels seen in November 2020.

In the regional breakdown, North American investors continued to lead the charge in the gold market. North American-listed gold ETFs saw inflows of 88.4 tonnes valued at $10.5 billion last month. The analysts said that investment demand throughout the month and the quarter was driven by similar factors.

“Dollar weakness persisted and now faces further pressure from the government shutdown. However, the dollar looks oversold technically and positionally, risking a short squeeze,” the analysts said. “Expectations of lower yields ahead, as the Fed delivered a 25bps cut during the month, also helped.”

European-listed funds saw their fifth consecutive month of inflows, with September marking the region’s third-strongest month ever for gold ETF activity. European holdings increased by 37.3 tonnes last month, valued at $4.4 billion.

“The ECB and BoE kept rates unchanged in the month, while inflation rose, lowering real rates and increasing policy uncertainty. Flows reflected both protection and momentum as investors sought a purchasing-power hedge and leaned into the breakout. Meanwhile, continued stagflation fears in the UK could be another key factor attracting gold ETF inflows,” the analysts said.

Asian-listed ETFs saw their holdings increase by 17.5 tonnes last month, valued at $2.1 billion.

“We believe the strong gold price performance in local currencies was a key factor. However, India led the region with inflows of US$902mn. We attribute this to favourable local currency dynamics and increased investment demand as investors look for safe havens amid weaker domestic equities and persistent geopolitical and trade risk,” the analysts said.

In a separate report, the WGC warned that robust investment demand — which drove prices to record highs last month — has pushed the market into significantly overbought territory. However, they added that while downside risks are growing, they still see strong fundamentals supporting prices through year-end.

Along with gold’s stretched bullish momentum, the WGC noted that the U.S. dollar is significantly oversold. However, one saving grace for gold could be a volatile equity market, as October is traditionally a turbulent month.

“While our analysis is only indicative, it leaves us somewhat confident that gold will hold its ground and perhaps see further uplift should equities experience a correction, given the plethora of supportive factors elsewhere,” the analysts said. “Perhaps only a major liquidity squeeze could upend both gold and equities, but there are no clear signs of fractures in credit or banking sectors…yet.”

Source: kitco

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Adam

Forex

The price has broken above the 100-day exponential moving average (EMA100, dark purple), which in March—amid trade-related uncertainty—initiated the strongest downward trend in the world’s leading currency since 2022. Pressure on the USDIDX began to stabilize after the index hit a 3-year low in June, but a sustained trend reversal seems unlikely given the direction of U.S. monetary policy, which could still turn more dovish.

Dollar at its strongest in two months 💲📈 Lack of U.S. data is suppressing the bearish trend_1

USDIDX broke above EMA100.

The swap market currently assigns a 75% probability to two interest rate cuts in the U.S. before the end of 2025. The Fed’s tone remains cautious, emphasizing a dual risk (potential increases in both inflation and unemployment), while the end of Jerome Powell’s term is approaching. Even if the Fed has ended the easing pause that began in December 2024, a truly dovish shift has yet to occur.

Dollar at its strongest in two months 💲📈 Lack of U.S. data is suppressing the bearish trend_2

Pricing of further U.S. interest rate cuts in the futures market.

Paradoxically, the dollar is strengthening despite the lack of major economic data releases (for instance, today’s weekly jobless claims were not published). This has shifted investors’ attention toward the “rest of the world,” particularly to politically chaotic France. It’s no surprise, then, that the euro has become one of the biggest losers in the dollar’s new bullish narrative. Over the course of the week, the common currency has weakened by about 1.5% against the USD, marking what could be its largest weekly drop since November 2024.

Dollar at its strongest in two months 💲📈 Lack of U.S. data is suppressing the bearish trend_3

EURUSD on weekly interval.

Source: xtb

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Thomas

Economic

The Bureau of Labor Statistics said it will publish the September consumer price index on Oct. 24, marking a rare exception to release data during the government shutdown.

The report will come out that day at 8:30 a.m. in Washington, compared to the original publication date of Oct. 15, the agency said Friday.

“No other releases will be rescheduled or produced until the resumption of regular government services,” BLS said in a statement. “This release allows the Social Security Administration to meet statutory deadlines necessary to ensure the accurate and timely payment of benefits.”

Source: Bloomberg Europe

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Samantha Luan

Forex

Political

Economic

Honda, BYD, and Chery dealerships in Mexico City, Mexico.

Mexican lawmakers will pause until late November the discussion of a government proposal to impose tariffs of as much as 50% on cars, steel and other products imported from China and several Asian nations that don’t have a trade deal with the country, according to a top congressman.Ricardo Monreal, leader of the ruling Morena party in the lower house of Congress, said that lawmakers must be careful with the proposal and review it “very seriously.”“We’re going to put it on hold,” Monreal told journalists. “We can address it by the end of November.”

The Economy Ministry didn’t immediately reply to a request for comment.

President Claudia Sheinbaum’s administration sent the plan to Congress last month, seeking to raise levies on more than 1,400 categories of products coming from countries with which Mexico has no trade agreement. Economy Minister Marcelo Ebrard said the proposal seeks to protect the Mexican industry from unfair competition.While the plan to Congress was initially made as part of the government’s proposed 2026 budget, lawmakers are now seeking to debate it separately from the spending plan.China, South Korea and India are among the exporters that would be hit under the proposed levies, which requires Congress approval. The import taxes would also affect items such as auto parts, toys and furniture, with rates of 10% to 50% depending on the category.

The proposal caused unease in China, which launched a trade barrier investigation aimed at safeguarding the interests of its industry, according to a statement from the Chinese Ministry of Commerce. The ministry reiterated that if Mexico goes ahead with the unilateral tariff hike, it will harm the interests of China and other trading partners, seriously undermine the predictability of Mexico’s business environment, and weaken investor confidence.“We have to be more careful, given that tariffs are being imposed on countries that, without being trading partners, engage in intense, and sometimes unfair trade with our products in Mexico,” Monreal added Thursday.

As part of the North American trade pact that includes the US, Canada and Mexico known as the USMCA, those trading partners would be unaffected by the tariffs. Sheinbaum’s proposal could favor trade negotiations between Mexico and the US ahead of the review of that trade agreement, which is scheduled for next year.Trump imposed a tariff of 25% on Mexican goods earlier this year, though most are exempted because they comply with the US-Mexico-Canada trade pact. Certain sectors including steel and autos have been affected by the levies.In late July, Trump agreed to continue talks with Mexico for a 90-day period, instead of further hiking tariffs as he did to other countries at the time.

Source: Yahoo Finance

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Adam

Economic

The September-quarter reporting season begins on Tuesday, 14 October, when JPMorgan, Wells Fargo and Citigroup unveil their third quarter (Q3) 2025 results. These three banking giants will set the tone for the wider financial sector.

Their shares have performed strongly in recent months, despite some recent weakness. This resilience reflects continued optimism about sector earnings and the strength of capital markets activity.

The banking sector has benefited from a robust economy and increased corporate activity throughout 2025. Investment banking fees have recovered as companies return to the M&A market and pursue capital raising opportunities.

Trading desks have also enjoyed a productive quarter, with elevated volatility in equity and fixed income markets providing opportunities for revenue generation. This combination of factors has positioned banks well heading into results.

Analyst expectations point to strong results

BofA Securities has raised its forecasts for several major banks ahead of Q3 results. The firm expects better-than-anticipated investment banking and trading revenues to drive stronger performance across the sector.

Citigroup's earnings per share (EPS) forecast has been lifted to $1.91, with analysts setting a target price of $115 for the stock. This represents a significant upgrade from previous expectations.

JPMorgan's forecast now stands at $4.92 per share, reflecting confidence in the bank's diversified business model and strong market position. Morgan Stanley and Goldman Sachs have also seen their price targets increased.

Other major banks including Wells Fargo and Bank of America have benefited from revised forecasts. The broad-based nature of these upgrades suggests sector-wide strength rather than isolated success stories.

What's driving the optimism?

Investment banking has staged a notable recovery in 2025, with M&A activity picking up as companies gain confidence in the economic outlook. This has translated into higher advisory fees and underwriting revenues.

Trading operations have capitalised on market volatility, particularly in fixed income and currencies. Banks with strong trading franchises have been able to generate substantial revenues from client flows and proprietary positioning.

Net interest income remains resilient despite expectations of rate cuts. Banks have managed their deposit costs effectively while maintaining lending yields, preserving margins better than many anticipated.

Capital markets activity has accelerated, with initial public offering (IPO) pipelines building and debt issuance remaining robust. This provides a supportive backdrop for investment banking divisions across the sector.

Key themes to watch in bank earnings

Net interest income trends will be crucial, particularly as the market anticipates further rate cuts. Investors want to understand how banks plan to manage margins in a declining rate environment.

M&A activity and deal pipelines will provide insight into future revenue visibility. Banks with strong backlogs of announced but unclosed deals should benefit in coming quarters.

Trading performance across asset classes will reveal which banks best capitalised on market opportunities. Strength in equities, fixed income and commodities trading will be scrutinised.

Capital deployment plans deserve attention as banks accumulate excess capital. Share buyback programmes, dividend increases and potential acquisitions will all be on the agenda as rate cuts approach.

Market sentiment and investor positioning

Market strategist Ed Yardeni notes the S&P 500 Diversified Banks index has reached a record high. This performance reflects record forward earnings expectations and investor confidence in the sector's outlook.

However, this strength raises questions about whether optimism is already fully priced into bank shares. Strong results may be needed simply to justify current valuations rather than drive further gains.

The recent pullback in some bank shares suggests profit-taking after a strong run. This could create opportunities for investors who believe the earnings strength will continue beyond Q3.

Sector rotation into financials earlier this year positioned many investors long banks ahead of results. The earnings season will test whether this positioning proves prescient or premature.

Understanding bank business models

Banks generate revenue through multiple channels, making them complex businesses to analyse. Net interest income from lending represents the traditional core, but investment banking and trading have become increasingly important.

Investment banking divisions advise on M&A transactions, help companies raise capital through equity and debt offerings, and provide strategic advisory services. These activities generate fees that are less capital-intensive than lending.

Trading operations act as market makers and take proprietary positions across asset classes. While potentially volatile, successful trading divisions can generate substantial returns during periods of market activity.

Asset management and wealth management units provide steady fee income and help diversify revenue streams. These businesses typically carry lower risk profiles than trading or lending operations.

Source: ig

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Adam

Forex

Economic

ECB is Not Gearing Up for Monetary Policy Changes

Members of the ECB maintained an unambiguously neutral tone in their statements today, suggesting that the cycle of interest rate cuts has ended, and they describe the current state of monetary policy as close to neutral. Both Mārtiņš Kazāks and José Luis Escrivá emphasized that the inflation target has been achieved, and current readings do not require any reaction from the central bank. At the same time, they cautioned that short-term deviations from 2% will not be treated as a reason to adjust rates.

ECB Not Gearing Up for Changes. Is EURUSD Undervalued?_1

Expectations indicate no prospects for interest rate cuts in the near term

These statements align with the broader ECB's communication in recent weeks: the lack of inflationary pressure and the stabilization of expectations allow for a "wait and see" stance, especially since risks to economic growth have not materialized. Therefore, we can speak of a consolidation of monetary policy at the current level, with a low probability of both further cuts and a return to tightening.

Does France Remain a Problem for the Euro?

Against the backdrop of the region, the thread of France's fiscal situation, discussed by François Villeroy de Galhau, remains particularly interesting. Despite maintaining the GDP growth projection at 0.7% for 2025, the country faces serious budgetary challenges—the deficit is approaching 5.5% of GDP, and public debt is hovering around 116%. This is significantly above the EU limits (3% and 60%), increasing tensions in the context of future negotiations with the European Commission. Additionally, political instability could cost the economy up to 0.5 percentage points in GDP growth.

It was these negative reports concerning France that heavily dragged the euro down this week, although the strength of the US dollar itself was also a factor. While the European economy remains in a difficult position, as suggested by data from Germany this week, it seems that EURUSD may be somewhat too heavily oversold, a point also indicated by the yield spread.

ECB Not Gearing Up for Changes. Is EURUSD Undervalued?_2

The yield spread indicates excessive overselling in the EURUSD pair.

n summary, the ECB signals a stabilization of monetary policy, while risks are shifting to the fiscal and political spheres, particularly in France. The bank sees no reason to react as long as inflation remains contained, but it is simultaneously observing the balance between slowing growth and maintaining fiscal credibility in the Eurozone.

Technical Analysis (EURUSD)

EURUSD saw a retracement below the 1.16 level and the 61.8% Fibonacci retracement yesterday, signifying a breakout from the uptrend. However, a new lower low in the downward sequence was potentially established yesterday, so an upward correction to the 1.16-1.1630 level cannot be ruled out. The 60.0% retracement remains the key resistance, where price reactions were observed previously.

ECB Not Gearing Up for Changes. Is EURUSD Undervalued?_3

Source: xtb

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Damon

Economic

US consumer sentiment was little changed in early October as Americans expect scant improvement in the job market or inflation.

The preliminary October sentiment index edged down to 55 from 55.1 in September, according to the University of Michigan. While the latest figure was the lowest in five months, it was firmer than the median projection in a Bloomberg survey of economists.

Consumers expect prices to rise at an annual rate of 4.6% over the next year, compared with 4.7% a month earlier, according to the data released Friday. They saw costs rising at an annual rate of 3.7% over the next five to 10 years, unchanged from September.

“Pocketbook issues like high prices and weakening job prospects remain at the forefront of consumers’ minds,” Joanne Hsu, director of the survey, said in a statement. “At this time, consumers do not expect meaningful improvement in these factors.’’

The absence of official data releases because of the government shutdown has reduced visibility into an economy characterized by resilient consumer spending. Still, private-sector economic indicators and surveys indicate the labor market remains soft, while manufacturing and services activity struggle for momentum.

About 63% of respondents said they expect unemployment to rise in the next year, down a touch from the prior month but nearly twice as high as last year. More than two-thirds see inflation exceeding their income growth in the coming year, the report showed.

Buying conditions for durable goods dropped to the lowest level since 2022 on concerns about tariffs.

The survey showed the current conditions gauge rose to 61 this month from 60.4 in September, while the expectations index eased to a five-month low.

A gauge of sentiment among Republicans rose to the highest level since Donald Trump's first presidential term. It also improved among political independents but fell among Democrats.

The survey was conducted Sep. 23 to Oct. 6.

Source: Bloomberg Europe

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