Gold correction, not collapse: Why Vallum sees another big rally ahead

Gold vs debt: Why Vallum says the metal's biggest trade is only reopening

For investors who bought gold near its highs and then watched the metal fall sharply, the temptation may have been to write off the rally. Vallum Capital believes that could be the wrong conclusion.

 

The investment firm said in a note on 24 August that the recent correction has not killed the gold thesis—it has reset it. Its message to investors is blunt: it may be time to start accumulating gold and silver again as a new phase of the “debasement trade” takes shape.

 

The firm’s argument rests on a combination of signals that matter more than the latest gold price headline: US real yields have turned, the dollar is reversing and central banks are buying gold at an extraordinary pace.

 

 

And there is another reason Vallum is bullish: despite gold's spectacular run, the metal's supply response has been remarkably muted.

 

The signal Vallum is watching

 

Forget the daily gold price for a moment. Vallum says investors should watch two numbers instead—the 2% real-yield threshold and the US Dollar Index (DXY).

 

Both have started moving in a direction that could support precious metals.

 

The logic is relatively simple. When real yields fall, the opportunity cost of holding an asset such as gold falls. At the same time, a weaker dollar makes dollar-denominated gold more attractive.

 

But Vallum's argument goes beyond the usual “rates down, gold up” playbook.

 

It believes the US Federal Reserve is increasingly caught between two difficult choices. Raising rates would increase the cost of servicing the $9.2 trillion of debt that needs to be rolled over, while keeping rates lower risks leaving real rates negative with inflation still above target.

 

Either way, Vallum sees pressure on the purchasing power of the dollar.

 

That is what the firm means by the “debasement trade”: owning assets that cannot simply be created by governments or central banks when debt and money supply keep expanding.

 

Central banks are buying while Western investors sell

 

The most striking part of the gold story may be what happened beneath the headline price.

 

In the second quarter of 2026, central banks bought 288.9 tonnes of gold—up 411% from the previous quarter, according to Vallum.

 

That buying came even as some traditional sources of demand weakened.

 

Western gold ETFs recorded 44.8 tonnes of outflows, while jewellery demand declined 17%.

 

Yet gold remained 37% above its year-ago level.

 

For Vallum, that is evidence that the market's centre of gravity is shifting.

 

The old gold cycle was heavily dependent on Western investment demand and the relationship between real yields and gold. That relationship, Vallum argues, broke in 2022 and has not returned.

 

Gold supply isn't responding to the price

 

There is another number that stands out: gold miners aren't producing much more despite the huge increase in prices.

 

Mine production rose only 2%, while recycled gold actually fell 6%. Total gold supply was broadly flat.

 

That matters because gold is fundamentally different from fiat money. Governments and central banks can create more currency. Debt can keep expanding. Gold cannot be manufactured at the same pace.

 

Vallum estimates that all the gold above ground is worth roughly $31 trillion, compared with around $102 trillion in major central-bank money supply and $350 trillion in global debt.

 

The firm's point is not that gold will automatically rise because global debt is high. Rather, it argues that the enormous gap between scarce physical gold and an expanding pool of money and debt creates a long-term case for holding the metal.

 

And then there is silver

 

If gold is the defensive bet, silver could be the more aggressive one.

 

Silver has already dramatically outperformed gold in the current cycle.

 

Since 2021, silver has risen 263%, compared with 164% for gold. That's a stunning 99 percentage-point outperformance.

 

But Vallum thinks silver may still have room to run.

 

The gold-silver ratio currently stands at around 69 times, compared with its long-run median of roughly 45-50 times.

 

In other words, silver remains expensive relative to where it has historically traded against gold—but Vallum sees the ratio as another indication that the silver story has not fully played out.

 

Indian investors are already voting with their money

 

The precious-metals boom isn't just a global phenomenon. Indian retail investors have been pouring money into financial gold.

 

Between January 2025 and January 2026, Indian investors put around ₹93,000 crore into gold funds and ETFs, according to Vallum.

 

January 2026 alone saw a record ₹33,837 crore flow into these products, around the time gold reached approximately $5,608 an ounce.

 

Then came the correction.

 

Gold subsequently fell around 25-30%, wiping an estimated ₹23,000-28,000 crore from the mark-to-market value of that year's new inflows, according to Vallum.

 

But investors who stayed through the volatility saw gold recover from around $4,196 to $4,359.

 

So should investors buy now?

 

"It is time to reload Gold and Silver, as they appear to be poised for a significant upside move. The correction did not kill the thesis. It re-priced who owns it. The sell discipline worked both ways — the same rule that said trim into $5,600 says re-enter into fiscal dominance signals, not into headlines. The 2% real yield threshold and a reversing DXY are structural markers, not chart patterns," noted Vallum Capital.