Market Overview: Gold Retreats, Silver Holds Firm
On July 28, 2026, international precious metals markets showed divergence. Spot gold, after briefly hitting $2000 earlier in the month, has been declining and is now trading near $1,950 per ounce, down about 0.5% intraday. Silver is relatively resilient, holding around $28.2 per ounce, with a loss of less than 0.2%. The gold-silver ratio edged up from about 69 early in the month to 69.5, reflecting silver's relative strength.
Gold Under Pressure: Safe-Haven Sentiment Fades and Dollar Rebounds
Gold's pullback is mainly driven by two factors:
1. Global Risk Appetite Rises
Since July, positive signals from US-China trade talks and better-than-expected European economic data have significantly reduced global risk aversion. The VIX index fell from 22 early in the month to below 17, with funds flowing out of gold ETFs. Data from the World Gold Council shows that in the week ending July 24, global gold ETF holdings decreased by 18.5 tons, the third consecutive week of net outflows.
2. Technical Rebound in the US Dollar Index
After falling to a low of 99.5 in June, the US dollar index rebounded to around 101.3 in July, supported by hawkish comments from Fed officials and strong US employment data. A stronger dollar puts direct pressure on gold, which is priced in dollars. However, market expectations for a September rate cut remain around 60%, limiting downside for gold prices.
Silver's Strength: Industrial Demand as the Main Engine
Silver has held up well amid gold's pullback, with core support from continued expansion in industrial demand:
1. Record Solar Photovoltaic Installations
The latest report from the International Energy Agency (IEA) shows that global solar PV new installed capacity reached 180 GW in the first half of 2026, up 35% year-on-year. Silver paste, a key material for photovoltaic cell electrodes, has seen rising demand. According to the Silver Institute, silver demand for photovoltaics will exceed 8,000 tons in 2026, accounting for over 18% of global total silver demand.
2. Growth in 5G and Electric Vehicle Demand
With the acceleration of 5G base station construction and the increasing electronics content of new energy vehicles, silver application in electronic components, connectors, and battery sheets continues to expand. Data from China's Ministry of Industry and Information Technology shows that 60,000 new 5G base stations were added in the first half of 2026, boosting silver usage in high-frequency copper-clad laminates by 20%.
3. Limited Mine Supply Growth
Production guidance from major global silver miners for 2026 shows total supply increasing only 1.5%, far below demand growth. Major producing regions such as Peru and Mexico face declining ore grades and labor issues, limiting supply-side flexibility.
Central Bank Policy and Rate Expectations: Divergence Continues
Divergent monetary policies among major central banks add to precious metals market volatility:
- Federal Reserve: The July meeting kept rates at 5.25%-5.5%, but the statement leaned hawkish, stressing that inflation remains sticky. CME rate futures show the probability of a September rate cut dropped from 75% early in the month to 60%, and the expected magnitude of rate cuts this year narrowed from 75 bps to 50 bps.
- European Central Bank: Cut rates by 25 bps to 3.5% in July as expected. President Lagarde hinted at further easing but gave no clear timeline.
- Bank of Japan: Unexpectedly hiked rates by 15 bps to 0.25% in July, the first hike since 2024, causing Japanese government bond yields to surge and triggering carry trade unwinding, creating short-term volatility for gold.
Overall, the policy contrast between rate cut expectations in the US and Europe and rate hikes in Japan leaves dollar liquidity ample, but the BOJ's tightening has marginal effects on global capital flows.
Institutional Views and Outlook
Major investment banks have diverging views on gold and silver:
- Goldman Sachs: Maintains year-end gold target of $2,100, believing global central bank gold purchases remain robust (483 tons net in H1 2026, up 12% YoY), but short-term adjustments may continue until the Jackson Hole meeting in August.
- J.P. Morgan: Bullish on silver's outlook, raising its 2026 average silver price forecast to $30, arguing industrial demand will drive silver to outperform gold, recommending shorting the gold-silver ratio.
- TD Securities: Points out that speculative net long positions in gold remain high, posing a risk of further squeeze, and recommends waiting for a pullback below $1,900 to gradually build positions.
Looking ahead to the second half of the year, market focus will turn to the Fed's rate path guidance at the August symposium and policy uncertainty ahead of the US midterm elections in November. Additionally, physical demand season ahead of India's Diwali (November) could provide a floor for gold prices. For silver, the "2026 Photovoltaic Silver Paste Industry Summit" in Qinghai in August may bring new demand catalysts.
Investment Suggestions
For short-term investors, gold faces short-term downward pressure. Watch support at $1,940; a break could test $1,900. Silver has strong support near $28; if it holds, buy on dips targeting $30. Medium- to long-term investors can gradually allocate to gold ETFs and silver mining stocks, using pullbacks to increase positions. Be mindful of short-term volatility risk from carry trade unwinding triggered by the BOJ rate hike.
(Disclaimer: The above analysis represents institutional views and does not constitute investment advice. Investing involves risk; make decisions with caution.)
