[Bullish for Precious Metals]
Global gold ETFs saw record net inflows, with institutional allocation demand making a strong comeback
Since August, global gold ETF funds have seen significant inflows. As of August 25, the SPDR Gold Trust's holdings reached 1,048.35 mt, adding over 41 mt cumulatively in August, the largest monthly addition since April 2022. The SPDR Gold ETF attracted nearly $3.4 billion in a single week. Pension funds and other large institutional allocators use gold as an inflation hedge and safe-haven proxy, and the return of investment demand provided sustained buying support for gold prices.
US public debt surpassed $40 trillion, driving demand for sovereign credit hedges
The total outstanding public debt of the US federal government officially surpassed $40 trillion, with concerns over fiscal sustainability continuing to brew. The sharp expansion in debt and persistent deficit pressures have long eroded dollar credibility, providing underlying price support for precious metals. Against a backdrop of elevated Treasury yields and questioned fiscal credibility, funds increased allocations to precious metals for sovereign credit hedging.
The US dollar index was generally weak, with indirect support from non-dollar currency tightening expectations
This week, the US dollar index consolidated in the 98.7-99.2 range, weakening significantly from previous highs above 100, with a cumulative monthly decline of 2.39%. The weaker dollar enhanced the global allocation appeal of dollar-denominated gold, attracting buying from the sidelines and lending support to precious metals futures.
Central bank gold buying accelerates, with the PBOC’s single-month addition hitting a new high for this cycle
The global central bank gold buying trend continued to strengthen, providing structural support for gold prices. On August 7, PBOC data showed that gold reserves stood at 76.08 million ounces as of end-July, a MoM increase of 640,000 ounces (approximately 19.9 mt), marking the 21st consecutive month of accumulation and the largest single-month purchase since the resumption of buying in November 2024, with the pace of purchases accelerating further. In Q2 2026, global central banks made net gold purchases of 289 mt, up 62% YoY, the highest level on record for the same period. Continued official sector buying reinforced the reserve diversification rationale for precious metals, and the downside room was effectively constrained.
[Bearish for Precious Metals]
July PCE data was modestly warm, lifting September rate hike expectations slightly
The US July PCE price index released on August 26 rose 3.7% YoY, slightly above the market expectation of 3.6% and unchanged from the previous reading; it rose 0.2% MoM, above the expected 0.1%. Core PCE was up 3.3% YoY and 0.2% MoM, both in line with expectations. The slightly above-consensus headline PCE was mainly driven by services spending, indicating persistent inflation stickiness. Inflation indicators failed to cool further, and after the data release, expectations for a September rate hike ticked up slightly.
With the Jackson Hole symposium approaching, policy uncertainty rises ahead of Warsh's debut.
The Jackson Hole Economic Symposium will be held at month-end, where Warsh will deliver his first keynote speech since taking office, marking the most important public remarks ahead of the September FOMC meeting. Currently, US inflation remains significantly above the 2% target. Warsh faces the challenge of balancing price pressures with economic growth, and the market is deeply divided over his policy stance. Ahead of the meeting, wait-and-see sentiment is thick; bulls have proactively scaled back positions, causing precious metals volatility to rise significantly.
US Treasury yields consolidate at highs; elevated real rates continue to weigh on valuations.
Although the Treasury’s expanded buyback operations temporarily eased supply pressure, the 10-year US Treasury yield continued to consolidate at highs in the range of 4.64%–4.74%, while the 30-year yield briefly touched 5.34%, a new high since June 2007. Persistently high US fiscal deficits, heavy debt rollover pressure, and the Fed’s ongoing balance sheet reduction make it difficult for long-end yields to trend lower. The landscape of elevated real rates has not undergone a material reversal, continuing to suppress the valuation of non-yielding precious metals.
Gold prices have surged significantly in the short term, and pressure is mounting for a technical pullback and profit-taking.
Since August, spot gold has surged over 12%, rapidly climbing from below $4,000/oz to near $4,700/oz, with the short-term rally excessively sharp and too fast-paced. After the PCE data release, gold accelerated its decline, reflecting an intensified tug-of-war between longs and shorts as some bulls took profits. Technically, there is a need to correct overbought conditions, and gold may face a phase of pullback pressure.
[Macro Summary]
This week, the precious metals market exhibited a consolidation pattern at highs. Spot gold broke through the $4,600/oz level early in the week, driven by the US Treasury’s expanded bond buybacks, escalated US-Canada tariff tensions that boosted safe-haven sentiment, ETF inflows, and a weakening US dollar, reaching an intraday high of $4,697. However, toward the end of the week, gold pulled back to around $4,590, pressured by the neutral-to-hot July PCE data and a wait-and-see mood ahead of the Jackson Hole symposium. On the macro front, bullish and bearish factors are intertwined: easing US debt supply pressure, rising trade frictions, and renewed institutional allocation demand provide support, while persistent inflation stickiness and heightened policy uncertainty impose headwinds. Going forward, key areas to watch include Warsh’s Jackson Hole speech on August 28, the September Fed FOMC meeting, developments in the US-Canada tariff war, and the US-Iran situation.
>View SMM precious metals spot quotes
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