Gold weakness may be related to systematic trend-following fund flows

Overview

This report discusses why gold's performance from April to July was weaker than implied by central bank and ETF flows. Deutsche Bank continues its prior view that central banks and ETFs are demand sources with lower price elasticity, and that combining them explains gold behavior better than looking at either alone. However, this report points out that since April, central bank and ETF flows have been unable to fully explain gold's weakness, and that rules-based, trend-following systematic flows may be a more suitable explanatory variable.

Core views

The core views are: first, combined central bank and ETF flows remain an important framework for explaining gold prices, but there is a recent gap in explanatory power; second, gold showed a negative residual from April to July, and this residual coincided with RSI below 50, suggesting that algorithmic or systematic selling may be weighing on gold prices; third, the current 30-day RSI is 42.7, which the report believes is insufficient to support near-term re-accumulation by systematic accounts; fourth, the gold price formation process may have complex, chaotic, or statistical characteristics, and therefore requires more systematic modeling of rules-based investment activity.

Analysis framework

The report first constructs a monthly picture of combined central bank and ETF flows as a share of gold supply, then compares these flows with month-over-month changes in gold's average monthly price to identify the negative performance gap from April to July. It then rules out CFTC futures positioning and Asian gold imports as the main explanatory variables, and, based on the joint appearance of RSI below 50 and the negative residual, proposes that systematic trend-following flows may have contributed to gold's weakness.

Methodology notes

• Flow analysisCombined central bank + ETF flow framework

  Combines official-sector and ETF demand and measures their explanatory power for prices as a share of total gold supply.

  The report argues that central bank and ETF demand are less price-elastic than jewelry demand, so observing these two types of flows together is more helpful for explaining gold behavior than looking at them separately.

• Technical and quantitative signalsRSI and trend-following flow inference

  Uses a 30-day RSI below 50 as a signal that systematic trend-following accounts may lack accumulation and may even be selling.

  The report notes that the negative residual in gold from April to July is associated with RSI below 50; as of July 24, the 30-day RSI was 42.7, indicating a low probability of near-term accumulation by systematic accounts.

• Market structure explanationEmergence and determinism

  Price history is both the result of collective investor behavior and, in turn, influences investor behavior.

  The report uses concepts such as emergence, chaos, computational irreducibility, and statistical properties to explain the complexity of gold price formation, and argues that this increases the need to model systematic fund flows.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Gold

  Core asset of the report

  Strengths

  Central bank and ETF demand still exhibit price-inelastic characteristics and in some months have absorbed a significant share of supply.

  Weaknesses

  Price performance from April to July was weaker than implied by central bank and ETF flows, and short-term momentum signals are weak.

  Comparison

  Compared with CFTC futures positioning and Asian gold imports, the report believes systematic trend-following flows are more likely to explain the recent negative residual.

  Risks

  If RSI remains below 50, near-term accumulation by systematic accounts may be insufficient, and gold prices may continue to be affected by trend-driven selling pressure.

• Gold ETF

  Gold demand and flow explanatory variable

  Strengths

  When combined with central bank demand, it has stronger explanatory power for gold price behavior than when observed alone.

  Weaknesses

  ETF and central bank demand alone cannot fully explain gold's weakness from April to July.

  Comparison

  ETF flows are one of the price-inelastic demand sources in the report, but in the short term their impact may still be offset by systematic flows.

  Risks

  If ETF flows improve but technical trends remain weak, gold price reactions may fall short of model expectations based on flows.

Key data

• Report date2026-07-24The report cover page is dated 24 July 2026.
• Share of supply absorbed by central bank + ETF demand in January 202648%The report states that official-sector and ETF demand absorbed 48% of January gold supply.
• Share of supply absorbed by central bank + ETF demand in March 2026-3%The report states that this ratio fell to -3% of supply in March 2026.
• Range of central bank + ETF flows after March0%-29%The report assumes official demand in the second quarter was unchanged from the first quarter, and states that this ratio has fluctuated between 0% and 29% since March.
• Gold 30-day RSI42.7As of July 24, 2026, the report considers this level too low to support near-term accumulation by systematic accounts.

Impact & implications

If systematic trend-following flows do indeed explain gold's weakness from April to July, then looking only at central bank purchases and ETF inflows may overestimate short-term support for gold. For investors, underlying gold flows remain important, but the short-term price path also requires monitoring of technical momentum, rules-based account positioning, and price feedback mechanisms.

Risks

• Systematic fund flows have not yet been formally modeled; the current judgment is based on the relationship between the residual and RSI, creating a risk of incomplete explanatory variables.
• The gold price formation process may be affected by random shocks such as economic data, creating high short-term forecasting uncertainty.
• If future models incorporate systematic fund flows, the April-to-July gap may narrow, but new explanatory gaps could also emerge for December 2025 to February 2026.
• The report is for informational research purposes and does not constitute a buy or sell recommendation, and Deutsche Bank discloses that its views and trading activity may be inconsistent.

What to watch

• Whether gold's 30-day RSI rises back above 50.
• Whether central bank and ETF flows as a share of gold supply continue to improve.
• Whether the negative residual from April to July converges in subsequent data.
• The modeling methods and follow-up research results for rules-based, trend-following systematic accounts.
• Whether CFTC futures positioning and Asian gold imports shift from neutral or positive to negative.