The upside for gold and silver still depends on when ETF flows return

Overview

This report focuses on the outlook for gold and silver in 2H26 through 2027. The core view is that precious metals lack near-term direction and are being pressured by ETF outflows, rate hike expectations, and Middle East tensions, but the base-case view of a recovery in central bank gold buying, renewed macro positioning, and no further Fed hikes still leaves room for a rebound in both gold and silver.

Core views

For gold, improving central bank gold buying is the most important floor support, with China buying about 40.1 tonnes year to date, Poland about 63.6 tonnes, and Uzbekistan about 32.7 tonnes, while Turkish selling has slowed markedly. On ETFs, North American flows are the marginal swing buyer; North American gold ETFs saw outflows of 42 tonnes in June and net outflows of 60.5 tonnes in 1H, leaving global gold ETF holdings roughly flat year to date. For silver, industrial demand, especially photovoltaic demand, is weakening, and jewelry demand is also under pressure, but if ETFs resume inflows or silver begins tracking copper again, its high-beta characteristics could bring greater upside.

Analysis framework

The report evaluates gold and silver across dimensions including demand structure, fund flows, central bank reserve behavior, Fed rate expectations, real rates, the dollar, futures positioning, technicals, and industrial end demand. For gold, it focuses on central bank gold buying, ETF flows, and COMEX non-commercial net longs; for silver, it focuses on ETF holdings, photovoltaic silver usage, jewelry demand, and changes in its correlation with gold and copper.

Methodology notes

• Macro rate frameworkFed path and real-rate sensitivity

  ETF inflows depend on fading rate hike risk and a clearer rate cut path

  Gold and silver ETF holdings are usually sensitive to Fed rates, real yields, and the dollar. The report argues that the market needs greater confidence that the Fed will at least remain on hold and pivot to rate cuts next year before ETFs can resume large-scale buying.

• Demand structure frameworkDecomposition of central bank demand and ETF swing buyers

  Central bank demand provides the floor, while ETFs determine upside elasticity

  Central bank gold buying is relatively less affected by short-term prices and monetary policy, making it a floor support for gold; ETF flows are an important source of upside price elasticity, especially North America-listed funds, which have a marginal impact in both upcycles and downcycles.

• Cross-asset correlation frameworkChanges in silver’s correlation with gold and copper

  Silver is temporarily decoupling from traditional precious metals and industrial metals linkages

  The report notes that silver’s correlation with gold fell from 98% in 2H25 to 79% in 1H26, while its correlation with copper dropped from 95% in 2H25 to around 0% currently, reflecting how industrial demand pressures and macro factors are changing silver’s pricing drivers.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Gold

  Core bullish asset

  Strengths

  Recovery in central bank gold buying, renewed macro positioning, and ETF inflow tailwinds if the Fed stays on hold and pivots to rate cuts.

  Weaknesses

  North American ETFs are still seeing outflows, and the price remains below the 200-day moving average with technical pressure from the 50-day moving average crossing below the 200-day moving average.

  Comparison

  Relative to silver, gold has lower industrial demand risk and its floor depends more on central bank demand; relative to silver, its upside elasticity is lower.

  Risks

  An escalation in Middle East tensions pushing up oil prices and inflation expectations, renewed Fed rate hike expectations, continued ETF outflows, and continued CTA selling into strength.

• Silver

  High-beta precious metals allocation

  Strengths

  If ETFs resume buying, correlation with copper recovers, or macro rate pressure eases, silver could have greater rebound potential than gold.

  Weaknesses

  Photovoltaic and jewelry demand are under pressure, while high silver prices and volatility are driving thrifting, substitution, and deferred demand; COMEX positioning also remains muted.

  Comparison

  Relative to gold, silver has fallen more recently and the gold-silver ratio has returned to around 70x, leaving room for valuation repair; but relative to gold, its fundamentals are more clearly dragged down by the industrial cycle.

  Risks

  Further declines in photovoltaic silver usage, weak jewelry demand, additional ETF outflows due to Fed hikes, and failure of the copper correlation to recover.

• COMEX Copper

  Potential linked asset for silver

  Strengths

  The report believes COMEX copper could relatively benefit if U.S. copper tariffs are delayed or the decision is postponed; Chinese demand has remained fairly resilient despite high prices.

  Weaknesses

  If the tariff scenario is fully ruled out, COMEX copper faces downside risk.

  Comparison

  Copper and silver have historically had strong correlation due to electrification demand, but in 2026 silver’s correlation with copper has already fallen to around 0%.

  Risks

  Changes in the U.S. tariff path, slowing Chinese demand, and weaker U.S. buying in 2027.

Key data

• Gold 4Q26 forecast price$4,450/ozMorgan Stanley forecasts that if the Fed avoids another rate hike and ETFs re-engage, gold has about 11% upside by 4Q26.
• Silver 4Q26 forecast price$65.40/ozThe report forecasts about 16% upside for silver within the year, with greater elasticity than gold, though constrained by weak industrial and photovoltaic demand.
• ETF share of demand in 2025Gold about 20%, silver about 15%ETFs were an important source of precious metals demand in 2025, but turned into sellers in 2026 due to rate hike concerns and inflation worries related to the Middle East conflict.
• PBOC gold buyingAbout 40.1 tonnes year to date, 14.9 tonnes in JuneChina has bought gold for 20 consecutive months, and June’s purchases were the largest monthly increase since October 2023.
• Polish central bank gold buyingAbout 63.6 tonnes year to datePoland has continued its strong gold-buying momentum from 2025, running ahead of the pace implied by roughly 100 tonnes for the full year 2025.
• Identifiable global central bank gold buying84.4 tonnes year to date through MayThis is down about 30% from the same period in 2025, but net purchases recovered to 21.5 tonnes in April and 41.2 tonnes in May, respectively.
• Regional gold ETF flowsGlobal net outflow of 74 tonnes in June, including 42 tonnes outflow from North AmericaNorth American flows were the main source of recent gold ETF outflows, with net North American outflows of about 60.5 tonnes in 1H.
• COMEX gold non-commercial net longsRose to 194k lots as of July 15This was an increase of 34k lots, including 23k lots of new longs and about 12k lots of short covering.
• Silver ETF holdingsDeclined from about 870 Moz to 784 MozThis is a roughly 10% decline in 2026 to date, larger than gold holdings, which are down about 5% from their peak.
• Photovoltaic silver demandAccounted for 17% of silver demand in 2025Photovoltaic silver’s share rose from 7.4% in 2019 to 17% in 2025, but demand fell 6% year over year in 2025 and is expected to decline another 19% in 2026.

Impact & implications

In investment terms, gold looks more like a macro asset supported on the downside by central bank demand and driven upward by returning ETF flows; silver has both precious-metal and industrial characteristics, and while it is being dragged down in the short term by photovoltaics, jewelry, and technological substitution, it may display higher beta if rate pressure eases, ETFs turn back to net buying, or copper-driven correlation recovers. The main observation window is tilted toward 4Q26, as the report suggests ETF re-engagement is more likely in the fourth quarter.

Risks

• The Fed re-enters a rate hike cycle, causing real rates to rise and suppressing ETF demand for gold and silver.
• Renewed escalation in the Middle East pushes up oil prices and inflation expectations, leading the market to reprice for more rate hikes.
• Continued outflows from North American gold ETFs and global silver ETFs weaken marginal buying support for precious metals.
• Gold remains below its 200-day moving average and has formed a 'death cross,' so CTAs may continue selling rallies.
• Silver photovoltaic demand, jewelry demand, and Chinese imports continue to weaken, while silver thrifting and substitute materials accelerate.

What to watch

• U.S. CPI, inflation trends, and changes in Fed rate hike or rate cut expectations.
• Whether North American gold ETF flows and global silver ETF holdings turn positive again.
• Whether central bank gold buying continues in China, Poland, Uzbekistan, and others, and whether gold selling by Turkey, Russia, and Azerbaijan continues to ease.
• Whether gold can reclaim the 200-day moving average and reverse CTA selling pressure.
• Whether the silver-copper correlation recovers, and developments in photovoltaic silver usage, solar output, module silver intensity, and substitution technology.
• The impact of Middle East conflict, oil prices, and dollar moves on real rates and safe-haven demand.