Silver and Gold Hold Support as India's Diwali Demand Flips the Script

MARKET SNAPSHOT

Gold Spot (XAU/USD)	$4,161–$4,176/oz (up approx. +$12, +0.3% from prior close) — constructive overnight hold above $4,156 support; COMEX December futures at $4,206.80 with resistance activating near $4,190–$4,200 in US pre-market
Silver Spot (XAG/USD)	$56.87–$57.53/oz (slight pullback from Friday's $57.91) — modest underperformance relative to gold as Hong Kong Gold Exchange closure removed one Asian industrial-demand reference venue
Gold/Silver Ratio	72.54:1 — widened from 72.32 on Friday; above the 60–65 historical mean band, silver remains historically undervalued on this measure
Brent Crude	$107.57–$108.06/bbl (down approx. -1.9% from Friday's $109.86 multi-month high) — Trump executive order waiving Russian sanctions and tariffs is the direct catalyst; net positive for the dollar channel, modestly complicating for the inflation-hedge narrative
WTI Crude	$100.40–$100.88/bbl (down -0.5% to -1.0% from Friday's $101.41 close) — Strait of Hormuz shipping risk limits further downside
DXY (US Dollar Index)	101.64–102.08 — two-week low; technical break below the nine-day EMA on Warsh's IMF Bangkok non-signal; dollar softness intact into the new week
10-Year Treasury Yield	5.0525% (down approx. -4bp from Friday) — continued compression from post-CPI spike; bond market relief following Warsh's non-committal posture on the October hike
S&P 500 (SPY)	$767.34 (up +$4.09, +0.54% from Friday) — modest Monday recovery after the AI-driven selloff; VIX at 19.99 (Friday close, up +21.45% on that session, briefly above 22 intraday — four-month high, just below the 20 stress threshold)

Three data points define the structure of this Monday open. COMEX December gold futures printed $4,206.80, up $25.70 (+0.61%) at 07:29 GMT, but spot encountered specific resistance near $4,190–$4,200 in US pre-market trading. According to CME Group, COMEX open interest stood at 321,954 contracts as of October 17, indicating continued institutional participation in the gold futures complex. On the positioning side, the CFTC Commitments of Traders report covering October 13 positions (released October 16) showed gold net speculative long contracts compressing to 210,300 from 218,600 the prior week, and silver net speculative long falling to 22,600 from 23,200 — a modest but specific de-risking signal heading into the October 27–28 FOMC window. The People's Bank of China reported 23 tonnes added to gold reserves in September 2026, the largest single monthly purchase since October 2023, per World Gold Council data; total reserves now stand at a record 2,410 tonnes.

MARKET CONTEXT

The dominant conversation entering this week is not about what central banks are doing to gold prices. It is about what they are doing with gold itself.

The PBoC's September purchase of 23 tonnes is the largest monthly addition in nearly three years. That brings China's 2026 total to 103 tonnes and pushes official reserves to 2,410 tonnes — roughly 8.5% of total reserves in a portfolio the World Gold Council values at $3.8 trillion. ECB President Lagarde framed the broader picture directly: "Geopolitical tensions continue to drive strong central bank demand for gold." The ECB now puts gold at 27% of global central bank reserve assets, up from 20% one year prior. Chinese gold ETF assets under management hit a record 304 tonnes after Q3 inflows of RMB 27 billion — approximately $3.9 billion — per World Gold Council and Bloomberg. China gold imports from January through August 2026 exceeded 1,100 tonnes, the strongest annual pace since at least 2017.

Meanwhile, the macro backdrop has shifted in ways that matter for both metals. Fed Chair Kevin Warsh declined to signal a rate hike at the IMF annual meetings in Bangkok on Friday. CME FedWatch now prices October hike probability at approximately 15%, down from 41.5% five days ago. The dollar extended its retreat to two-week lows and the 10-year Treasury yield compressed another 4 basis points to 5.0525%. None of this is an all-clear — December hike probability remains above 90%, which creates a specific structural cap on gold near $4,220 that the $4,190–$4,200 resistance band reflects directly.

There is also a cross-asset dynamic running simultaneously. CoreWeave, one of the most prominent AI infrastructure names, fell 26% last week — down two-thirds from its June 2025 peak. The Nasdaq posted its worst weekly performance since June. The VIX closed Friday at 19.99 after briefly touching 22 intraday, a four-month high. Options markets are pricing for VIX above 23 by mid-November per CNBC. That kind of equity stress has a well-documented pattern of accelerating flows into precious metals, and this week is no different.

One complicating factor worth naming directly: the Trump administration's executive order on Friday waived Russian tariffs and sanctions, paired with a diesel supply deal. Brent fell nearly 2% from Friday's multi-month high as a direct result. Lower oil removes some of the inflation premium that had been supporting gold's safe-haven bid. The net effect is modestly positive for gold via dollar relief, but it complicates the pure inflation-hedge argument. The Strait of Hormuz shipping risk limits how far oil can fall, so this is a partial offset rather than a trend reversal.

The Hong Kong Gold Exchange is closed today for the Chung Yeung Festival public holiday. That matters in a specific way: Friday's session flagged that a third consecutive day of all three trading sessions moving in agreement would represent a meaningful technical signal. With Hong Kong out today, and US pre-market running into resistance at $4,190–$4,200, that signal has not formally activated. The Shanghai Gold Exchange Au(T+D) contract traded at $4,187.73/oz this morning — approximately $19–$23 above Western spot — but Hong Kong's physical outcry market was absent. Tuesday is when Hong Kong reopens, and Dhanteras, India's peak gold-buying day, begins.

Which brings us to the most important international development of the morning.

India's physical gold market flipped from a $6/oz discount to a $7/oz premium in a single week — the first premium in three months — driven by festival and wedding season demand accelerating into constrained supply, per Discovery Alert and World Gold Council data. The physical flip signals active demand into Diwali on October 21, two trading sessions away. Separately, seventeen Indian fund houses including SBI, ICICI, HDFC, Tata, and Kotak restricted gold ETF fund-of-funds subscriptions around October 15–16, following ₹4,450 crore in September inflows that pushed them against regulatory limits on overseas investment. The compound signal: retail buyers in India are channeling demand into physical coins and bars at precisely the moment the ETF route has closed. That is not a bearish development for the physical market.

MAVERICK TRADING JOURNAL

We carry two open positions into this week. No new call today.

The GLD call opened on June 26 at a $366 entry. GLD closed Friday at $382.01 — approximately $5 above the $377 documented target line, for the third consecutive session. That position is materially past where the original target was set and has been sitting there for three sessions now. Resolving it is the most pressing item on the desk this week. We hold two open positions, which means no new derivative entry on either metal, in either direction, until that resolution happens.

The SLV buy opened on March 31 at a $64.03 entry. SLV closed Friday at $51.51, putting the wrapper approximately 19.5% below entry. Silver spot at $56.87–$57.53 today sits roughly $6.50–$7.16 below that entry level — modestly wider than Friday's gap as today's slight pullback and the Hong Kong closure effect both register in silver's performance relative to gold. This position remains well above its documented stop and open pending the same resolution process.

The framework that governs this: two open positions mean no fresh entries on either side until the existing round is resolved. That structure exists specifically to prevent compounding directional exposure before the first decisions are finalized. The GLD wrapper sitting past target for a third consecutive session means the clock on that decision has been running for a few days now.

The session divergence picture this morning is worth understanding because Friday's brief flagged Monday as a specific gate. Asian overnight was constructive — gold held $4,156–$4,168 on dollar weakness and fading October hike odds, with the SGE Au(T+D) premium running $19–$23 above Western spot, slightly above its recent average. Australian dollar gold came in at AUD $5,978/oz, up 1.5% per Guardian Gold AU. London held above $4,160 into European hours. Frankfurt gold closed at EUR 3,729.49/oz (+0.47%). The ECB's Eurosystem gold and gold receivables stand at EUR 1,286,239 million as of October 9. But with Hong Kong out and US pre-market encountering resistance at $4,190–$4,200, the clean three-session confirmation that would activate the trend-breakout signal did not materialize. The configuration remains a mild bullish continuation within a defined resistance band — not a breakout.

THE TAKEAWAY

Gold at $4,161–$4,176 sits approximately 25% below its January 2026 peak. Silver at $56.87–$57.53 has pulled back meaningfully from its late-August reference. The Gold/Silver Ratio at 72.54 sits well above the 60–65 historical mean band — on that measure, silver has historically been undervalued relative to gold when the ratio runs in this range.

The structural picture supporting both metals is an observable pattern, not a forecast: the PBoC has bought gold for 23 consecutive months; Chinese gold ETF assets hit a record this quarter; India's physical market is running a premium heading into its largest gold-buying week of the year; central banks collectively now hold 27% of reserves in gold, up from 20% a year ago per the ECB. These are the sovereign and institutional accumulation channels. They operate on multi-year timelines that the October 27–28 FOMC meeting does not interrupt.

The near-term picture is more textured. Resistance at $4,190–$4,200 held in US pre-market. December hike odds above 90% create a real ceiling near $4,220. The AI infrastructure selloff is supporting safe-haven demand but may not sustain at Friday's intensity. These are the oscillations within a larger move — worth tracking rather than reacting to impulsively.

Alex Lexington has operated in this business across three generations spanning nearly five decades. The pattern of sovereign accumulation running now is not something we have seen at this scale or this pace in our experience. That context does not change what any individual buyer should do today versus next week. What it does inform is how someone thinks about the multi-year arc of owning physical gold and silver versus holding paper proxies through an ETF that, as seventeen Indian fund houses just discovered, can be subject to regulatory caps at exactly the moment demand is highest.

Physical buyers observing the current spot range are seeing both metals sitting inside the range that a dollar-cost averaging framework is designed to absorb over time. The Silver Institute's multi-year supply deficit framework, the byproduct-metal supply constraint from global copper mine production dynamics, and the industrial demand floor from solar panels, EVs, electronics, and AI data center cooling all underpin silver alongside its monetary role. The structural conditions for both metals are pointing in the same direction simultaneously.

Tuesday brings Dhanteras. Wednesday is Diwali. The FOMC follows on October 27–28. Those are the sessions that will shape direction for the rest of the month.

FORWARD OUTLOOK

The forward calendar for precious metals is unusually dense over the next ten sessions. Tuesday October 20 is Dhanteras — India's highest-volume physical gold buying day of the year. Wednesday October 21 is Diwali, with physical demand expected to sustain into the festival peak. Thursday October 23 brings the CFTC Commitments of Traders release covering October 20 positions, which will confirm whether modest speculative de-risking in both metals is continuing through the pre-FOMC window. The FOMC itself meets October 27–28, with a rate decision at 2:00pm ET on the 28th and no dot plot at this meeting. October hike probability is currently priced at approximately 15%, but the December hike priced above 90% remains the structural ceiling on gold's near-term upside. The BOJ meets October 29–30 immediately following the Fed, and September PCE is expected around October 30. The next catalyst capable of meaningfully overriding the current framework is the October 28 FOMC decision. Until then, the physical channels — particularly India into Diwali — are likely to lead directional signal over the Western derivative market.

DISCLOSURE

This content reflects disclosed trading activity and market analysis for educational purposes. Alex Lexington does not manage client funds or provide personalized financial advice. Past performance does not guarantee future results. Always consult a licensed financial advisor before making investment decisions.

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