On Monday (October 26), gold prices fluctuated around the $4,000 mark. Spot gold rebounded 0.4% to $4,012.09 per ounce, after hitting a low of $3,975 on Friday, its lowest level since July 20. Brent crude oil fell from a near six-month high to around $114, with cooling oil prices easing inflation concerns. Physical gold ETFs saw inflows for the 14th consecutive week, with holdings reaching nearly 102 million ounces, the highest since mid-2022, indicating a rare divergence between price and demand.

<H2>ETF 14-Week Inflows and Price Pullbacks: The Time Difference Between Two Types of Funds</H2>

Physical gold ETFs tracked by major overseas institutions have seen inflows for 14 consecutive weeks, with holdings reaching nearly 102 million ounces, the highest level since mid-2022. During the same period, gold prices fell by 1%, after previously rising as much as 16%, and then retreating 14% from their local highs. Long-term allocation funds hedge against fiscal uncertainty, geopolitical tensions, and the erosion of currency purchasing power, while short-term prices are dominated by interest rate expectations, oil and currency market fluctuations, and technical factors. Short-term marginal pricing power lies in the hands of interest rate traders, while long-term allocation funds provide support; the demand-price gap is essentially due to the different time dimensions of these two types of funds.

<H2>Oil Price Risk Premium: A Double-Edged Sword for Inflation Hedging and Interest Rate Suppression</H2>

Brent crude for December delivery briefly returned to around $115, having risen nearly 7% last week, with Middle East geopolitical risks being priced in. Supply is near pre-war levels, and demand has not shown a significant increase. The fair value in mainstream overseas institutional models is only $94, with Brent at about $20 higher, indicating a "very large" risk premium. Soaring freight rates have created regional price differences: the cost of delivery to Asia rose from $116 to $131, while the average pre-shipment price fell from $106 to $93. High oil prices have fueled inflation and interest rate hike expectations, increasing the opportunity cost of non-interest-bearing gold; the decline in oil prices has eased the pressure. On Monday, Brent fell 1.6% to around $114, giving gold prices a breather.

<H2>Interest Rate Pricing Ahead of the Fed Meeting: A Short-Term Anchor for Gold</H2>

The Federal Reserve is highly likely to maintain interest rates this week, with interest rate futures pricing indicating a 9% probability of a rate hike on Wednesday and an 83% probability in December. The PCE data on October 29th will be a key confirmation. The ECB and the Bank of Japan are expected to hold rates steady but retain room for a December rate hike. High interest rates increase the opportunity cost of gold, limiting the rebound's potential. Analysts from major overseas institutions have noted that $4,000 is seen as a watchdog level by some market participants, and there has been technical support in the past. Gold will continue to fluctuate around the interest rate path in the short term; fluctuations in oil prices or a PCE exceeding expectations could trigger repricing. Continued inflows into ETFs provide a buffer. Physical buying in India's Dhanteras and Diwali markets has led to a rebound in local gold prices; retail prices also include taxes and processing fees.

<H2>A Linked Perspective: The Triangle of Oil, Currency, Interest Rates, and Gold</H2>

Oil prices influence interest rates through inflation expectations, which in turn affect gold prices through the dollar and opportunity costs, and the foreign exchange market further alters local gold prices in non-US markets. Freight rates reshape the relative value of global crude oil, and regional inflation differences also affect central bank communication. The current core contradiction is: ETF holdings are at record highs, yet prices are suppressed by expectations of a December rate hike. Going forward, we need to observe the retracement of oil price risk premiums, the PCE and the Fed's December path, and whether ETF inflows continue. Further escalation of geopolitical tensions could lead to a simultaneous rise in oil prices and interest rate expectations; a decline in oil prices would alleviate the interest rate pressure on gold.

The phenomenon of "hot demand and cold prices" for gold places long-term investment and short-term interest rate trading on the same chart. When ETF holdings reach a new high while prices remain suppressed by interest rates, whichever force shifts first will determine the next direction.

<H2>Further Reading</H2>

Question: Why is the price of gold still falling despite continuous inflows into gold ETFs?

A: ETFs reflect long-term allocation to hedge fiscal and geopolitical risks, while short-term prices are dominated by interest rate expectations, oil prices, foreign exchange market and technical factors. The two types of funds have different time dimensions.

Question: How does the oil price risk premium affect gold?

A: High oil prices have fueled inflation and interest rate hike expectations, increasing the opportunity cost of non-interest-bearing gold; falling oil prices have eased this pressure. The current risk premium is around $20, and freight costs are widening regional price differences.

Q: What will the Federal Reserve be looking at at this week's meeting?

A: Look at the statement's hints about the December path. Interest rate futures are pricing in an 83% probability of a December rate hike, which will be confirmed by the PCE on October 29th. High interest rates are limiting the upside potential for gold.

Q: What is the significance of the $4,000 mark?

A: Some market participants see it as an observation window, and there has been technical support in the past; it is more like the intersection of short-term sentiment and interest rate pricing, and does not constitute an operational signal.

Q: What are the risks associated with subsequent联动 (linkage/cooperation)?

A: The oil price risk premium has been eroded, PCE exceeded expectations, and geopolitical tensions have escalated again. Continued ETF inflows provide a buffer, while shifting interest rate expectations will determine the short-term direction.