I. Bottom Line & Directional Bias
This report holds a bullish view on SHFE Gold (AU2612).
Core rationale:
1. Strong macro drivers: Although the pace of the Fed's rate-cut cycle has shifted, the downtrend in real rates is firmly established, which is bullish for non-yielding gold. Frequent geopolitical risks have pushed up the safe-haven premium, while continued gold purchases by global central banks provide downside support.
2. Healthy technical setup: Prices successfully retested the psychological CNY 900 level and stabilized, closing at CNY 908.64 on the [2026-10-09 settlement], up 1.55% from the prior trading day, forming a short-term reversal signal. The 20-day moving average has flattened and turned slightly upward, providing dynamic support.
3. Elevated fund sentiment: Main contract open interest hit a record high, reaching the 95th percentile of the past year, indicating intense long-short contention; however, combined with rising prices, longs are strongly and proactively adding positions, providing ample momentum.
Conditions that would invalidate the directional bias:
If the daily close effectively breaks below the key support at CNY 880/gram for two consecutive trading days, or if the US dollar index unexpectedly breaks strongly above the 105 mark, causing dollar-denominated gold to come under heavy pressure and fall sharply, accompanied by a significant decline in COMEX gold non-commercial net long positions turning to net short, then the current bullish logic would be disproven, requiring a shift to neutral and wait-and-see or consideration of a stop-loss exit. In addition, if China's inflation data comes in weaker than expected, fueling expectations of monetary policy tightening, this would also weaken gold's appeal.
II. Price Action & Technicals
SHFE Gold has recently traced a pattern of decline followed by recovery. Looking back at last week, the [2026-09-28 to 2026-09-30 weekly] high touched CNY 918.98, the low dipped to CNY 892.62, and the week finally closed at CNY 910.58, a weekly decline of 1.84%, reflecting high-level consolidation. Entering this week, market volatility intensified, with the [2026-10-08 settlement] price at CNY 893.12, briefly approaching the strong support zone below CNY 890, triggering some panic selling. However, the [2026-10-09 settlement] quickly recovered lost ground, surging 1.55% to CNY 908.64, not only reclaiming all short-term moving averages but also completing a V-shaped reversal intraday, indicating extremely strong buying support below.
From a technical indicator perspective, the price is currently above the Bollinger Band midline and running near the upper band, suggesting a possible technical correction after short-term overbought conditions; however, as long as the midline support holds, the upward channel remains intact. The MACD is about to form a golden cross above the zero line, with the red histogram beginning to expand, signaling that bullish momentum is building. The RSI has recovered to around 55, moving out of the weak zone but not yet into extreme overbought territory, leaving room for further upside.
On key levels, the first resistance above is in the CNY 918-920 range, a dense zone of prior highs that has been tested unsuccessfully multiple times; the second resistance is the CNY 950 round-number level. The first support below is the psychological CNY 900 mark, followed by the recent low of CNY 889.82, with the final line of defense at CNY 880. Given the elevated ATR14 reading and large intraday swings, investors should pay attention to position management and guard against false-breakout risk. Night session data shows that the [2026-10-09 night session] closed at CNY 908.48, essentially flat versus the day session, indicating limited influence from international markets overnight, with Chinese market pricing power dominant.
III. Supply-Demand Balance & Fundamental Drivers
On the fundamental front, gold as a special commodity has a uniquely rigid supply-demand structure. On the supply side, mined gold output grows slowly, and recycled gold supply lacks elasticity due to recycling cost constraints, leaving overall supply with little potential for explosive growth. On the demand side, investment demand is the primary source of marginal change. As the global de-dollarization process accelerates and countries implement foreign reserve diversification strategies, official-sector gold purchases have shifted from tactical allocation to strategic accumulation, a structural change that provides a solid long-term floor for gold prices.
In the Chinese market, Shanghai Gold Exchange inventory data reflects the temperature of physical demand. As of [2026-10-09], SHFE GOLD warrant inventory remained at 116,028 kg, with zero daily change, indicating a smooth delivery process, with neither physical tightness from large-scale warrant cancellation and withdrawal nor inventory buildup from selling. This stable inventory level combined with elevated board prices suggests that current high prices have been accepted by both upstream and downstream of the industry chain, with strong consumption resilience.
In addition, the slight increase in GLD ETF holdings also confirms institutional investor confidence. Although the increase was modest, the ability to attract long-term capital inflows after a price correction indicates that professional investors are bullish on the outlook. Notably, there are no major bearish headlines in China-related news, and the policy environment is relatively friendly. With the upcoming mid-October economic data release window, if retail sales, industrial production, and other data come in solid, it will further consolidate the appeal of RMB assets, indirectly benefiting RMB-denominated gold. Conversely, if data is weak, expectations for monetary easing would strengthen, which is also bullish for gold. Therefore, regardless of how macro data plays out, the current environment tends to support gold prices remaining at elevated levels.
IV. Positioning & Fund Flows
Positioning structure is an important barometer of market sentiment. The latest data shows that total open interest in the SHFE Gold main contract reached 228,458 lots, a sharp increase of 1,440 lots from the prior trading day, with notional open interest exceeding CNY 207.59 billion. Such massive committed capital has made this instrument a focal point of the futures market. It is particularly worth noting that the reason this deep-dive report was triggered is “open interest at the 95th percentile of the past year,” meaning open interest is at the 95th percentile level of the past year, which typically signals that the market has entered a highly active or even overheated phase.
Among the top 20 seats, the long camp shows a clear offensive posture. Specifically, the top 20 members collectively held net long positions of 160,373 lots, a single-day net increase of 2,962 lots. Of this, total long positions stood at 219,469 lots, up 4,449 lots; while short positions were only 59,096 lots, down 1,487 lots. This “longs adding, shorts cutting” pattern clearly reveals the attitude of major funds: they are not only actively establishing new long positions but also releasing potential downside pressure by closing shorts. This behavior pattern typically occurs in the early or accelerating phase of a trend, rather than in the top distribution phase.
Meanwhile, in international markets, the COT report shows that the managed fund net long ratio, though slightly lower, remains in the elevated 28%-30% range, with the crowding index exceeding 90, reflecting that international speculative capital is also chasing this rally. The resonance effect between international and Chinese market capital has enhanced price stability. However, high open interest comes with high risk; once the trend reverses, the massive leverage effect could lead to a stampede-style selloff. Therefore, although current fund flows clearly point to the long side, traders should closely monitor inflection points in open interest changes and guard against the impact of profit-taking outflows. Implied volatility GVZ has risen to 22.79, above realized volatility RV20 of 17.9%, with the options market paying a premium for future uncertainty, which also indirectly validates that the market's concerns and expectations for subsequent volatility coexist.
V. Cross-Asset Relative Value and Global vs China Markets
From the perspective of global asset allocation, gold's relative value relationships with other assets provide important valuation references. First, observing the Gold/Silver Ratio, the current reading stands at 69.07, positioned between the 74.6th percentile over the past year and the 24.87th percentile over the past three years. This means that relative to silver, gold appears relatively expensive, or alternatively, silver is significantly undervalued. Historically, when the gold/silver ratio is elevated, it often signals rotation opportunities within the precious metals complex, whereby silver may play catch-up and compress the ratio. For pure gold longs, this is a warning signal, suggesting that the risk-reward of a single bet on gold may be deteriorating, and one could consider allocating to silver as a hedge or replacing part of the position. However, given silver's stronger industrial attributes, its elasticity is less stable than gold's when the economic recovery outlook is uncertain; therefore, in risk-off mode, the persistence of a high gold/silver ratio is acceptable.
Second, the Copper/Gold Ratio has fallen to 1.59, sitting at an extremely low 98.02nd percentile over the past year. Copper represents economic growth expectations, while gold represents safe-haven demand and fiat currency credit debasement. The extremely low copper/gold ratio profoundly reflects the market's pessimism toward the global economic outlook and doubts about fiat currency credibility. In this macro backdrop, gold's financial attributes are maximized—even if equities or other commodities weaken, gold can remain resilient or even strengthen against the tide. As long as copper prices do not take off and drive a ratio recovery, gold enjoys strong macro endorsement.
Turning to the Oil/Gold Ratio, the reading is 0.0218, at the 89.68th percentile over the past year. This indicates that oil prices are very cheap relative to gold, or that gold is extremely expensive relative to oil. Typically, an energy crisis or high inflation would push oil prices higher and in turn drive gold prices, but the current divergence between the two suggests that the driver behind gold prices is not traditional inflation trading, but rather a deeper restructuring of the monetary system and a shift in risk appetite. If this divergence were to converge, it would either require oil prices falling sharply to drag gold down, or gold continuing to surge while waiting for oil to catch up. Given the current complex geopolitical landscape, the latter is more probable.
Finally, regarding the linkage between international and Chinese markets, the premium of SHFE Gold over COMEX gold stands at +0.16%, wider than the +0.03% recorded five days ago. The positive premium indicates robust Chinese demand, with the import window slightly open but not fully closing the price gap due to factors such as exchange rates. The stability of the RMB exchange rate is also an important factor sustaining this premium. If the RMB appreciates in the future, it may compress gains in the Chinese market, but if the RMB depreciates, it would further elevate SHFE gold prices. In summary, cross-asset relative value broadly points to gold's strong position, but also highlights the complexity of internal rotation and external linkage; investors need to enjoy the trend dividend while paying attention to these subtle changes in market microstructure.
VI. Historical Statistics & Seasonality
Based on a backtest sample of 20 trading days from the same date over the past 15 years, SHFE Gold's seasonal performance from mid-October to early November exhibits a mildly bullish bias. During the statistical period, the average return was +0.48%, the median return reached +0.91%, and the proportion of positive years was 60% (9 out of 15 years). The extreme distribution shows that the best year, 2011, recorded a significant excess return of +6.43% during the same period, while the worst year, 2015, saw a drawdown of -5.71%, indicating that although the period is overall upward-tilted, tail risk cannot be ignored.
Combined with the current market environment, although the seasonal factor provides weak positive support, its weight is lower than macro drivers and technical patterns. Considering the expected easing of global liquidity in Q4 this year and the normalization of geopolitical premiums, seasonal patterns may reinforce rather than weaken the bullish logic. However, one should be wary that if the US Dollar Index rebounds on unexpectedly strong US non-farm payroll data, the seasonal tailwind could be temporarily suppressed. Overall, the historical same-period win rate exceeds 50% with a positively skewed mean, supporting a buy-on-dips strategy, but it is not advisable to chase highs based solely on seasonal effects.
VII. Scenario Analysis
Base Scenario (60% probability): Oscillating upward, testing prior highs
Trigger conditions: Daily close holds above the 900 CNY mark, open interest remains elevated without extreme position cuts, US Dollar Index fluctuates in the 102-104 range.
Target prices: First resistance at 918-920 CNY (dense prior-high zone), second target at 931.91 CNY (corresponding to the short-term strategy take-profit level).
Trading recommendation: Hold AU2612 long positions. If price encounters resistance and pulls back near 918 CNY without breaking below the 908 CNY entry price, partial take-profit is acceptable; if price breaks above 920 CNY accompanied by open interest build, then target 931.91 CNY.
Optimistic Scenario (25% probability): Accelerated surge, breaking to new highs
Trigger conditions: Sudden geopolitical escalation or the Fed releasing a more dovish signal, causing a large-scale return of COMEX gold net longs, with SHFE Gold gapping higher in tandem with international markets and quickly reclaiming 920 CNY.
Target price: 950 CNY round-number level.
Trading recommendation: Aggressive traders may add positions up to the maximum of 4 lots, with stop-loss raised to 918 CNY to lock in profits. In this scenario, closely monitor whether GVZ implied volatility surges further; if the IV/RV ratio exceeds 1.5, it signals an overheated options market and early exit should be considered.
Pessimistic Scenario (15% probability): Breaking support, trend reversal
Trigger conditions: US Dollar Index forcefully breaking above 105, or Chinese economic data unexpectedly strong triggering tightening concerns, causing large-scale capital outflows from the precious metals sector.
Invalidation confirmation: Daily closing price below 880 CNY/gram for two consecutive days.
Trading recommendation: Once the invalidation condition is triggered, immediately close all long positions and either reverse to short or stay on the sidelines. If price repeatedly grinds around 893.13 CNY (short-term stop-loss level) but ultimately fails to hold the 880 CNY defense line, it indicates that bearish forces hold absolute dominance, and bottom-fishing is inadvisable.
VIII. Trading Strategies & Risk Management
Based on risk control verification results, execute the following two layered strategies:
Strategy One: Short-Term Swing (1-5 day horizon)
- Entry: Long AU2612 at reference price 908.64 CNY.
- Stop-Loss: 893.13 CNY. This level sits just above the [2026-10-08 settlement] low of 891.1 CNY, and is exactly 1×ATR (15.51 CNY) from the entry price, consistent with the principle of protecting key technical support. A break below this level would signal failure of the short-term V-shaped reversal and exhaustion of bullish momentum.
- Target: 931.91 CNY. Risk-reward ratio approximately 1:1.5.
- Position Sizing: Single-trade risk budget of 66,920 CNY, risk per lot of 15,560 CNY (including commissions and slippage), reference maximum of 4 lots. Strictly prohibited to exceed position limits.
Strategy Two: Medium-Term Trend (1-2 week horizon)
- Entry: Long AU2612 at reference price 903.23 CNY (pivot point P).
- Stop-Loss: 887.72 CNY. Maintaining the same 1×ATR risk exposure, aimed at capturing the second launch opportunity after a pullback.
- Target: 926.5 CNY. Risk-reward ratio 1:1.5.
- Add/Reduce Rules: Initial position not to exceed 2 lots. If price rises along the 5-day moving average with open interest increasing in tandem, add 1-2 lots after breaking above 918 CNY, and raise the overall stop-loss to 908.64 CNY to protect capital. If sideways consolidation persists for more than 3 trading days with volatility contracting (RV20 falling below 15%), reduce position by half to lower time-cost erosion.
Risk Factors: Given that current open interest is at the 95th percentile over the past year—a highly crowded state—any bearish news could trigger stampede-style liquidation. Strictly enforce stop-loss discipline and avoid holding losing positions.
IX. This Week's Data Calendar
Focus on China's macroeconomic data release window, which directly affects RMB asset pricing and safe-haven sentiment:
- October 14, 09:30: China CPI YoY, PPI YoY. If inflation rebounds more than expected, it may reinforce anti-inflation buying; if deflationary pressure persists, it is bullish for gold under easing expectations.
- October 19, 10:00: China industrial output, retail sales, fixed asset investment and other heavyweight data. These data will determine the market's assessment of China's economic recovery strength, thereby affecting the USD/CNY exchange rate and the SHFE Gold international vs China price spread. Weak data typically benefits gold (safe-haven + easing expectations), while strong data may bring brief selling pressure.
This report is generated automatically from public quantitative and macro data for research and market tracking only. It does not constitute any investment advice.