Gold has endured heavy selling pressure in recent months, but a combination of near-record ETF outflows, improving seasonality and shifting futures positioning suggests bearish sentiment may be reaching an extreme. With prices holding above key support and options markets becoming less defensive, the evidence is building that the correction may be entering its latter stages.
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Why Gold's Momentum Is Beginning to Improve
Gold ETF Outflows Reach Second Worst Month on Record
ETF holdings continued to decline alongside gold prices in June, with outflows of $8.9 billion marking the second-largest monthly withdrawal on record. Only March's record $11.7 billion outflow was larger, while the next closest comparison dates back to April 2013. With only halfway through the first month of Q3, and already ETF flows are on track for their weakest quarterly performance since Q1 2024. Yet perhaps this could be taken as a contrarian signal for bulls, especially since seasonality tends to support gold as we make our way through to August.
Source: Gold.org
Gold Seasonality Hints at Stronger Weeks Ahead
Looking at seasonality data since 2000 shows that June has typically been a bearish month for gold, with slightly negative average and median returns alongside a low win rate of just 40%.
It didn't disappoint this year, with gold falling 12%—well beyond its average monthly decline of 3.5%. With gold down for a fourth consecutive month while fighting hard to hold above 4,000, my calls for a sentiment extreme finally appear to be coming to fruition.
July has historically delivered a 56% win rate, rising to 64% in August, while monthly volatility also tends to increase. Average positive returns strengthen over the same period. With sentiment at an extreme and seasonality turning more supportive, perhaps this rebound has further to run.
Source: COMEX, LSEG
Gold Finds Support as COT and Options Sentiment Improve
The weekly chart shows momentum is beginning to turn higher after three failed attempts to break below 4,000. Importantly, gold has yet to record a weekly close beneath this key level despite several intrawork attempts to do so.
The lower panel on the left chart shows net-long exposure among large speculators and managed funds is trending gently higher. At the same time, rising open interest points to increased participation in the gold futures market. On the surface, that combination could suggest fresh bearish positioning. However, with support continuing to hold, it instead suggests bulls are absorbing new short positions while quietly accumulating.
Given the supportive seasonality and stretched price action, I am paying closer attention to rising gold prices alongside improving risk reversals. The lower panel on the right chart shows options traders have increased their call exposure relative to puts over the past two weeks. While not an outright bullish signal in isolation, viewed alongside the evidence presented so far, it strengthens the case that sentiment is beginning to turn.
Source: ICE, Trading View
Gold Futures (GC) Technical Analysis
Prices have risen for a fourth consecutive session as renewed Middle East tensions return to the forefront for traders. However, resistance may emerge around 4,200, where the monthly pivot point converges with the recent swing high. While gold has the potential to break above this level by the end of September, bulls may prefer to see a modest pullback within this week's range before looking for a breakout. A sustained move above 4,200 would bring the 4,400 highs into focus, near the monthly R1 pivot.
Source: COMEX, TradingView
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