The yellow metal gained more than 4 per cent in the first week of September, taking year-to-date gains above 36 per cent. Momentum accelerated as geopolitical risks intensified, with fresh Russian strikes in Ukraine. Disappointing US data fuelled the rally with very weak employment data. Weak labour data could trigger the Fed into three 25 bps cuts this year, weakening the dollar and lowering Treasury yields, which would be supportive of gold price.
Treasury yields fell sharply, with the 10-year US Treasury dropping below 4.2 per cent, and the US dollar weakened, deepening bullish trends in gold. The price of gold is USD-denominated and hence, dollar weakness tends to trigger higher prices. Investor consensus also favours a 25 bps September rate cut, with some optimists even betting on a bigger 50 bps cut.
In terms of flows, global gold ETFs registered $5.5 billion of inflows in August, the third straight monthly rise, pushing total global ETF holdings up to 3,692 tonnes and assets under management to a record $407 billion. North American and European funds are leading global inflows, while Asia and other regions saw mild outflows.
There could be a short-term correction given the sharp rise, but the structural reasons for the rally remain intact — expectations of rate cuts, weak global GDP data and intensifying geopolitical tensions. In India also, gold is trading at highs on the MCX.
Silver also bounced to $41.17/oz on Monday, rebounding from $40.65, on the same expectations of US rate cuts. There’s supply tightening, with low inventories in London on LME and persistent ETF inflows. Comex futures have a premium over London as traders are pushing the metal into the US ahead of potential tariff actions. CFTC data indicates large net-long silver positions of 41,022 lots, the most bullish in five weeks. Silver is up over 40 per cent year-to-date, supported by flows influenced by safe haven considerations and also industrial demand from renewable energy sectors. US tariff and geopolitical tensions may lead to volatility.
Silver has many more industrial applications than gold and it is also USD-denominated. Hence, many of the same trends can apply. The US dollar sank to three-week lows last week, and the Dollar Index (DXY) bottomed at 97.43 in response to weak labour data.
Markets are now factoring in up to 75 bps of cuts in the Fed funds rate by 2025 year-end and 150 bps cuts by end-2026. US treasury yields have dropped across all tenures. Political risks add to uncertainty, with President Donald Trump intensifying attacks on an independent Fed and seeking greater influence over its board. Unless inflation spikes sharply higher, the consensus expectation is that the Fed is very likely to cut rates. The Rupee saw some RBI intervention after hitting 88.5. In the medium-term, the INR could be under pressure as FII net outflows persist and amid US-India trade tensions. The Federal Open Market Committee meets on September 16-17. The European Central Bank maintained the status quo on the Euro on Thursday.
Gold jewellery consumption continued a three-year downward trend in terms of volumes, slipping 7 per cent YoY to 30 tonnes. But the value of jewellery jumped to $3bn, up 30 per cent Y-o-Y, due to higher prices. Silver’s move is closely mirroring gold with a 37 per cent YTD return (in USD terms). Silver-backed ETFs have also seen record inflows between January-June 2025, exceeding total ETF inflows of the entire CY2024. Global silver ETF holdings are at over 1.13 billion ounces, valued at over $40 billion.
The Indian investor has always seen gold as a traditional safe haven and there are many ETF options available. Silver is also looking good and there are also silver ETFs available. Given the geopolitics, both metals may have further upside. Silver, in particular, also has strong industrial demand to shore up prices. Expense ratios and tracking errors are the essential differentiators for such instruments.
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