(Kitco News) – Gold and silver ETFs have risen well off last month’s lows, and while investor sentiment has yet to match the recent price action, the Iran conflict, sticky inflation and U.S. debt concerns will likely drive investors back to bullion, according to precious metals analysts at Heraeus.
In their latest update, the analysts noted that following the rally to $5,595/oz in late January, gold prices have seen their deepest and longest correction since 2022.
“The price has broken through a downtrend line so the question is whether that correction is over or has further to go,” they wrote. “After such a large price hike, 246% in 3.5 years, a period of consolidation is no great surprise. Six months is a similar length to the larger corrections since 2016 and a 29% price decline is larger, but those previous, shallower corrections followed much smaller price gains. However, the recent price rise has also taken it above its 200-day moving average that itself is still rising, which is a sign of an uptrend.”
Heraeus said that while investor sentiment has cooled, it’s unclear whether it has pulled back enough to set up further sustainable gains.
“The rally tends to resume once traders and investors are uninterested, if not outright bearish,” the analysts said. “In January, sentiment was extremely positive with retail traders rushing to buy in many countries, causing local shortages of gold bars. Demand has certainly eased since then. Bar and coin sales were down 36% in Q2’26 from Q1’26, at a still decent 307 tonnes (source: World Gold Council), and ETF holdings fell by 45 tonnes. The non-commercial traders’ net long position in gold futures had declined to 15 moz at its recent low point, down from 25 moz in January. However, that is still noticeably higher than in 2018 and 2022 at the end of two prior lengthy corrections in the gold price.”
Central banks, however, continue to buy gold regardless. “The Word Gold Council’s Central Bank Gold Survey noted that reasons to hold gold included gold’s performance during times of crisis, portfolio diversification, inflation hedging and as a geopolitical risk hedge,” they wrote. “Central banks’ gold purchases have slowed to 345 tonnes in the first half of 2026 but still look likely to come in higher than the average over the last 15 years.”
Heraeus believes investors will likely return to gold for the same reasons that central banks never stopped buying. “The US continues to run large budget deficits and government debt has passed $40 trillion, which is substantially larger than the size of the economy,” the analysts noted. “The US is far from alone in having debt above 100% of GDP and governments are not making a concerted effort to rein in their spending and reduce their deficits. That means that debts will continue to climb, leading to ongoing concerns about debt sustainability, inflation and currency depreciation.”
“In that environment, it seems likely that investors will continue to buy gold, suggesting that the longer-term path for gold is higher, even if in the shorter term the price is volatile.”
Regarding the recent price action, they noted that gold is showing signs of weakness after falling below $4,600/oz with little guidance from the Federal Reserve. “The US-Iran conflict is increasingly resembling a prolonged stalemate, with no final settlement reached after almost six months of fighting and negotiations,” the analysts said. “Iran and Oman have discussed a temporary shipping corridor, with a framework between those two countries reached, albeit without US approval. Meanwhile, US inflation remains elevated, with the headline PCE price index rising 3.7% year-on-year in July compared with expectations of 3.6%, while core PCE was unchanged at 3.3% and in line with forecasts. Federal Reserve Chairman Kevin Warsh’s first Jackson Hole address on 28 August offered little of the forward guidance markets had been hoping for, maintaining the reluctance to guide markets that has characterised his first months as Fed Chairman. Gold fell following the speech as Warsh hailed a resilient economy while maintaining his rhetoric that inflation was too high.”
Meanwhile, gold ETF holdings rebounded from their July lows as the gold price moved higher. “Registered gold ETF holdings bottomed at 96.2 moz on 20 July and have since increased by 2.7 moz, or 2.8%, to 98.9 moz,” they wrote. “Over the same period, the gold price has risen by almost 15%, from around $4,010/oz to $4,600/oz as of 27 August. The recovery has brought ETF holdings back to the 98.9 moz registered at the start of the year, although they remain around 2.0% below their year-to-date peak of 100.9 moz that was reached in late February.”
“Gold ETF holdings have generally followed movements in the gold price during 2026, and the latest rally has again encouraged investors to once again increase their exposure.”
Spot gold was seeing a fair amount of volatility early in the North American session, and last traded at $4,424.90 for a loss of 0.68% on the daily chart.
Turning to silver, Heraeus analysts noted that silver ETF holdings have also moved higher since hitting their 2026 lows in July, but inflows have lagged the recent price rally.
“Registered silver ETF holdings bottomed at 780.8 moz on 14 July and have since increased by 20.4 moz, or 2.6%, to 801.2 moz,” they wrote. “Over the same period, the silver price has risen by 16% from $58.75/oz to more than $68/oz as of 27 August. ETF investment has therefore responded positively to the rally. Despite the recent inflows, silver ETFs still hold 62.4 moz, or 7.2%, less metal than at the start of the year. The 863.6 moz held on 1 January was also the year-to-date high, meaning the recent recovery has so far reversed only around one-quarter of the roughly 83 moz of ETF outflows recorded between January and mid-July.”
“Silver ETF investors therefore appear to be returning as the price strengthens, but investment demand remains notably weaker than it was at the beginning of 2026.”
Silver prices were pulling back following the equity open on Monday morning after setting a double-top near $67.470 per ounce around 8 am ET.
Spot silver last traded at $66.282 per ounce for a loss of 0.11% on the daily chart.
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