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BMO Capital Markets said lower gold prices coincided with higher Indian bullion premiums and a rise in trading volume on a physically settled Shanghai Gold Exchange contract. At the same time, global gold ETFs had $1.1 billion in net outflows for the week ended Oct. 23, including $1.7 billion withdrawn from North American funds, partly offset by European inflows.
Lower gold prices are drawing signs of renewed buying in India and increased trading activity in China, even as investors pulled money from gold funds, according to BMO Capital Markets’ latest Precious Metals Monitor. The report said global gold exchange-traded funds lost $1.1 billion net in the week ended Oct. 23, with North American funds accounting for $1.7 billion in withdrawals, partly offset by European inflows.
Indian bullion premiums rose to $15 per ounce in the week ended Oct. 23, up from $11 the previous week, BMO said. The bank linked the increase to lower gold prices and buying ahead of the Dussehra festival. The premium is the amount buyers pay above the international benchmark price and can reflect local demand and market conditions.
Trading volume in a physically settled gold contract on the Shanghai Gold Exchange reached about 430 tonnes for the week, its highest level since April, according to BMO. That figure tracks contract trading activity; it does not, by itself, establish the amount of retail gold purchased or delivered in China.
The activity followed a 4% weekly decline in spot gold to the low $4,000s per ounce. BMO said the decline brought gold’s fall since the start of 2026 to 7%. The bank’s research team, including analysts Helen Amos and George Heppel, said physical buyers were beginning to return as prices fell.
Physical Demand Meets Fund Selling
The report points to different behavior across gold’s markets: premiums and exchange trading activity strengthened in parts of Asia while financial investors reduced their fund exposure. Those movements matter because they offer contrasting signals about demand, but they measure different things. A rise in a local premium or contract volume cannot be treated as proof that overall global demand has increased.
For investors and businesses that follow gold, the withdrawals show that buying from physical-market participants was not enough to prevent financial outflows during the reported week. BMO also said speculative positioning weakened, with net long futures positions at their lowest level since August. These indicators describe activity over specific periods; they do not determine where prices will go next.
The split also highlights the influence of competing market forces. BMO said gold remained under pressure despite easing bond yields and tensions in the Middle East, while investors reacting to weakness in U.S. equities moved into government bonds rather than gold. The report does not quantify how much each factor contributed to the price decline.
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Regional Flows and Central Banks
Global gold ETFs had recorded three months of net inflows before the $1.1 billion net withdrawal in the week ended Oct. 23, BMO said. North American funds saw $1.7 billion in withdrawals; European funds received $485 million. The regional figures do not add up to the global total on their own, as other regions and reporting categories also affect the overall number.
BMO also described diverging central-bank activity. Russia sold 6 tonnes of gold in September, its tenth consecutive month of sales, leaving its official holdings at their lowest level since 2019, the bank said. BMO linked the sales to fiscal pressure as the war in Ukraine continues. Kazakhstan signalled it planned to lower gold’s share of reserves from 78% to 75%; BMO said that could involve sales of about 14 tonnes if prices remained unchanged.
China moved in the opposite direction, increasing its gold reserves for a 23rd consecutive month in September. BMO reported holdings of 77.47 million ounces, up from 76.73 million ounces in August. The figures show different reserve decisions among countries and should not be conflated with the private-market trading and fund-flow data in the same report.
“The Shanghai Gold Exchange figure refers to trading activity in a physically settled contract.”
— BMO Capital Markets
Limits of the Demand Signals
The report provides weekly and monthly indicators, not a complete measure of physical gold purchases across Asia. Shanghai contract volume records trading activity, and the source does not provide a corresponding measure of how much gold was ultimately delivered to end buyers. The Indian premium increase likewise does not establish how much bullion was bought.
It is also unclear from the figures alone whether the reported Asian activity will persist beyond the period covered. BMO attributed the premium rise partly to lower prices and Dussehra buying, but the report does not quantify each cause. The ETF data show withdrawals for one week after several months of inflows; they do not establish whether investors will continue selling.
The report links investor choices to market conditions, including U.S. equity weakness, bond yields, oil prices and Middle East tensions. It does not isolate the effect of any one factor on gold prices. BMO’s account of Russia’s fiscal pressures and Kazakhstan’s potential sales is the bank’s explanation and forecast, not a confirmed statement of future transactions.
Fed Decision and Data Ahead
BMO identified the Federal Reserve’s Wednesday decision as the next test for the gold market. As of Oct. 27, markets assigned less than a 10% chance of another rate increase, down from about 70% a month earlier, according to the report. Those probabilities reflect market pricing at that date and can change; they are not a guarantee of the Fed’s decision.
BMO also pointed to U.S. economic growth and inflation releases on Thursday as possible drivers of expectations for monetary policy. Investors will be watching whether those releases alter rate expectations and whether fund flows, Indian premiums and Shanghai trading activity continue in the periods that follow. The source did not provide a subsequent price forecast or confirm how those indicators would develop.
Key Questions
What did BMO report about Asian gold buying?
BMO said Indian bullion premiums rose to $15 per ounce from $11 in the week ended Oct. 23, while weekly volume in a Shanghai Gold Exchange physically settled contract reached about 430 tonnes, the highest since April.
How much money left gold ETFs?
BMO reported $1.1 billion in net global gold ETF outflows for the week ended Oct. 23. North American funds had $1.7 billion in withdrawals, partly offset by $485 million in European inflows.
Does Shanghai’s trading volume measure Chinese retail demand?
No. The reported figure measures trading in a physically settled gold contract. It does not, on its own, show how much gold retail buyers purchased or took delivery of.
What events did BMO identify as the next market tests?
BMO pointed to the Federal Reserve decision on Wednesday and U.S. economic growth and inflation releases on Thursday. The report said these could affect expectations for monetary policy.
Source: northernminer.com
