(Kitco News) – Central bank gold demand appears to be dropping after over two years of historic highs, but a Fed rate cut could boost the rally higher, while silver ETF demand is continuing to climb even as coin sales slide, according to precious metals analysts at Heraeus.
In their latest precious metals update, the analysts noted that central bank bullion demand is pulling back from its recent highs.
“The People’s Bank of China increased its holdings of gold by 60 koz last month, a ninth consecutive monthly increase,” they wrote. “This took the bank’s total holdings to 73.96 moz (2,300 tonnes). The World Gold Council reported 166.5 tonnes of gold was purchased by central banks in Q2’25, which was the lowest quarterly amount since Q2’22. The 415 tonnes purchased in the first half of 2025 was down 21% compared to H1’24, but last year saw a record amount of gold acquired by central banks (1,089 tonnes).”
And while the Trump-Putin summit in Alaska concluded with no deal, it was still an economic win for Russia. “[T]he talks effectively put a hold on the next round of US sanctions on Russian goods, easing immediate pressure on Russia,” the analysts said.
Heraeus also reviewed rate expectations based on the latest U.S. inflation numbers. “Inflation in July remained at 2.7% year-on-year, clearly above the Fed’s 2% target, with core inflation (ex. food and energy) rising to 3.1%,” they noted. “Higher inflation is not supportive of a rate cut, but US officials are looking for rate cuts, with the Treasury Secretary saying the Fed should cut by 50 bps.”
“However, the futures implied odds are still at ~96% for a 25 bp cut at the Fed’s September meeting, with zero chance of a 50 bp cut,” the analysts said. “The 2-year Treasury yield reached its lowest level in almost a year, falling to 3.71% following the CPI news, which is unexpected given that core inflation went up.”
“If the Fed lower bound (currently 4.25%) remains more than 50 bp above the 2-year Treasury yield, the chances are that the Fed will cut rates in September,” they said. “The problem for the Fed and its credibility is that it may appear to have caved in to pressure even if the cuts were warranted by the data.”
Gold prices eased slightly last week after the threat of U.S. tariffs on imports was withdrawn. “Gold has climbed this year as the dollar has weakened without the Fed cutting rates, so if Fed cuts weaken the dollar further that could help to lift the gold price,” the analysts noted.
Spot gold delivered a strong performance overnight, but the price is sliding to start the week, with the yellow metal last trading at $3,336.21 per ounce for a loss of 0.02% on the session.
Turning to silver, Heraeus noted that while high silver prices have dampened coin sales, investors are still buying ETFs.
“Perth Mint sales of silver bars and coins were 452 koz in July, down quarter-on-quarter and year-on-year. In the first seven months of the year, silver bar and coin sales from the Perth Mint totalled 3.7 moz, down from 5.5 moz in the same period last year,” they wrote. “Silver American Eagle coin sales from the US Mint have also tailed off this year, with just 305 koz being sold in July. That takes the year-to-date total to 8.3 moz, which is 48% lower than the same period last year when the price was generally trading below $32/oz.”
“Meanwhile, silver ETF holdings have risen to 791 moz, up 10% since the start of the year,” the analysts said. “ETF holdings have gained 20 moz in the last four weeks while the price has fluctuated around $38/oz.”
“Total silver ETF holdings are still well below the peak from 2021 of over 1,020 moz, leaving plenty of potential room for further investment,” they said.
The silver price rallied to a session high of $38.270 just after 8:30 am EDT on Monday morning, but it has pulled back somewhat. At the time of writing, spot silver last traded at $38.084 per ounce and is up 0.20% on the daily chart.
