(Kitco News) – The gold and silver markets are reeling under the effects of the white-hot bull market rally, with prices and supplies showing enormous strain by several metrics, according to precious metals analysts at Heraeus.
In their latest precious metals update, the analysts noted that after rising over $200 per ounce to set its largest weekly gain of the recent rally, the yellow metal is extremely overbought.
“A ceasefire in Gaza and progress on peace removes some geopolitical concerns, which, in theory, would be bad for gold,” they wrote. “However, it seems that the fear of missing an opportunity is driving the rally.”
“Diwali may not be such a bright spot for India’s gold jewellery buyers, because record prices are likely to crimp jewellery sales,” they said. “The festival falls on 20 October and is an auspicious occasion for gold purchases. However, Indian jewellery buyers are price-sensitive and tend to wait out periods of price volatility.” The analysts noted that Indian gold jewelry sales were down 17% year-over-year in the second quarter to 88.8 tonnes.
“However, Indian investors may be helping to drive the price rally and with banks struggling to meet robust demand, the local gold premium reportedly reached $25/oz,” they said. “Gold’s availability in India may have been limited by subdued imports this year, with 8.3 moz imported in the year-to-August (latest data), down 44% compared to the same period last year. Imports in August last year were boosted to 5.0 moz by the reduction of the import duty from 15% to 6% in the month before.”
Turning to the U.S., Heraeus pointed out that the Federal Reserve appears to be warming to the idea of cutting interest rates again after the market had already been pricing this in for weeks. “Comments made by the Federal Reserve chairman Jay Powell regarding a weakening labour market suggest that the Fed is likely to cut interest rates at its next meeting at the end of October,” the analysts said. “The US government shutdown means that Bureau of Labor Statistics’ data is delayed, but privately produced estimates show an easing of the labour market, such as ADP’s report of 32,000 jobs lost in September.”
Gold prices saw a strong run-up into the North American open on Monday morning, and are trading back above $4,300 per ounce.
Spot gold last traded at $4,303.98 per ounce for a gain of 1.18% on the session.
And silver markets briefly caught their breath last week, even as spot prices surged above $54 per ounce.
“The squeeze in the physical market remained intense but loosened slightly, reflected by an easing in backwardation across the forward curve and a pullback in one-month lease rates from over 30% to 20%,” the analysts noted. “The forward curve stayed inverted, though near-term discounts narrowed from above 5% during the prior week to around 1%, with the curve flattening further out. COMEX inventories offered part of the explanation, with 10 moz exiting the US as traders engaged in cash-and-carry unwinds – selling spot and buying futures.”
Heraeus said that ETF activity was also highly volatile last week, with investors adding 9 million ounces in the early days before reversing course with two consecutive days of outflows exceeding 10 million ounces. “This marked the largest single session decline since February and indicated some jitteriness in sentiment,” they said. “Section 232 introduces another layer of uncertainty. The potential inclusion of silver in the review could hinder much-needed outflows from US warehouses, further tightening liquidity in other regions and encouraging domestic stockpiling.
The analysts also noted that the tug-of-war between investors and industrial users is heating up. “In India, new ETF subscriptions were halted amid a domestic shortage,” they wrote. “Silver imports into India fell 46% in the first eight months of 2025 compared to the same period in 2024. Investment demand has absorbed much of the surplus from 2024, leaving the local markets in deficit. As a result, end-users were left scrambling to secure metal ahead of the festive Diwali season, pushing Indian premiums well above global prices.”
Heraeus said that they still hold to the old adage that ‘the cure for higher prices is higher prices.’
“Demand can only withstand such pressure for so long before destruction inevitably sets in,” they said. “Historically, silver loadings in solar cells have moved inversely with price. For example, during the 2011 price spike, silver content fell by around 70%. That said, there is a growing view that the industry may be approaching the limits of silver thrifting. Even so, material innovations are expected to open the door to another step-down in silver loadings.”
Silver also shot higher on Monday morning, setting a session high of $52.782 at 9 a.m. EDT, but prices slid lower after the equity open.
Spot silver last traded at $52.240 per ounce for a gain of 0.64% on the daily chart.
