Hotter inflation data and changing interest rate expectations have put pressure on gold and silver prices. However, rising gold ETF holdings suggest investor demand remains resilient, while central bank activity highlights the continuing importance of gold in global reserves.
Gold and silver markets are navigating a challenging economic environment as stronger than expected US inflation data has prompted renewed speculation about interest rates. Higher bond yields and a stronger US dollar have weighed on precious metals, although gold has demonstrated resilience around important price support levels.
According to precious metals analysts at Heraeus, gold exchange traded fund holdings have continued to increase despite the recent price weakness. This divergence between prices and investor holdings provides an important insight into how demand for gold is evolving.
For those following the precious metals market, the latest developments highlight a familiar tension. Short term prices can be influenced by interest rates, currency movements and investor positioning, while longer term demand is also shaped by inflation concerns, financial uncertainty and the desire to diversify holdings.
Gold holds key support despite inflation concerns
Gold briefly fell below US$4,100 per ounce following the latest US Consumer Price Index figures. The initial market reaction saw Treasury yields and the US dollar rise as traders increased expectations of another Federal Reserve interest rate increase.
Higher interest rates can place pressure on gold because the metal does not pay interest. When government bonds offer more attractive yields, some investors may prefer interest bearing assets over gold.
However, the initial reaction subsequently eased. As bond yields and the US dollar retreated, gold recovered above US$4,100 per ounce and continued trading within the US$4,100 to US$4,200 range.
The recovery suggests that buyers remain active around these levels, even as uncertainty over US monetary policy continues to influence market sentiment.
For Australian buyers, movements in the US dollar are only part of the picture. The Australian dollar exchange rate also plays a significant role in determining the local price of gold. Consequently, movements in international gold prices do not always translate directly into equivalent changes in Australian dollar gold prices.
Gold ETF holdings rise despite weaker prices
One of the more notable developments reported by Heraeus is the increase in gold held by exchange traded funds.
Bloomberg tracked gold ETF holdings reached approximately 101.3 million troy ounces on 8 October 2026, their highest level of the year to date. This represented a 5.3% increase from the low of 96.2 million ounces recorded on 20 July and was approximately 2% above the level at the beginning of the year.
Holdings subsequently remained above 101 million ounces, even while gold prices struggled to regain their earlier highs.
This divergence is worth watching. During much of 2026, ETF holdings broadly followed the direction of gold prices. More recently, however, holdings have remained elevated despite the price correction.
Heraeus suggests that investors may be maintaining their positions or adding to them during price weakness while waiting for conditions to improve.
Demand has also become more geographically diverse. Asian listed funds accounted for almost half of the increase in global gold ETF holdings during the 12 months to September, compared with approximately 30% from US listed funds and 20% from European funds.
ETF holdings do not tell the entire story of gold demand, but the figures indicate that interest in gold has not disappeared simply because prices have encountered resistance.
Central banks continue to shape the gold market
Central bank activity remains another important factor in the precious metals market. However, individual institutions can adjust their reserves for reasons that differ from those driving the broader trend.
Kazakhstan’s central bank, which was among the world’s largest reported official gold buyers during the first eight months of 2026, plans to reduce gold’s share of its international reserves from approximately 78% to 75% by the end of the year.
Its gold holdings had reached around 386 tonnes, following purchases of approximately 36 tonnes during the first eight months of the year.
According to Heraeus, the planned adjustment reflects portfolio rebalancing, concentration risk and the relative attractiveness of US Treasury assets amid elevated yields. The adjustment may involve both derivatives and physical bullion sales.
The proposed reduction should therefore be viewed in context. A central bank adjusting the composition of its reserves does not, by itself, establish that central banks as a whole are abandoning gold.
For many monetary authorities, gold remains a reserve asset that can diversify holdings beyond foreign currencies and government debt. The decisions of individual central banks may change, but their motivations and long term reserve strategies are not necessarily identical.
Silver faces a tougher technical environment
Silver has also come under pressure following the latest US inflation figures.
The metal fell below the US$60 per ounce level and briefly approached the July lows around US$55 before recovering above US$57, according to the Heraeus update.
As with gold, the initial decline was associated with expectations of tighter monetary policy, rising Treasury yields and a stronger US dollar. The subsequent easing in those pressures helped silver recover some of its losses.
Nevertheless, the move below US$60 has weakened the metal’s short term technical picture.
Silver can be more volatile than gold because its market is influenced by several competing forces. In addition to investment demand, silver is widely used in industrial applications, including electronics, solar technology and other manufacturing processes.
This combination can create opportunities as well as additional price uncertainty. Changes in economic activity, industrial consumption, interest rates and investor sentiment can all affect the market.
For people accumulating physical silver, short term price movements should be considered alongside the costs of purchasing, holding and eventually selling the metal.
India’s precious metals tax rules clarified
India remains an important participant in the global silver market, and changes to its import arrangements can have implications for wholesale demand.
Heraeus reported that the Indian government had confirmed a 3% Integrated Goods and Services Tax applies to gold, silver and platinum imports by banks and nominated agencies. The exemption previously available to these channels was not extended beyond 31 March 2026.
Banks had already been paying the tax since April, following a temporary interruption to imports while the rules were being clarified.
Because the tax can generally be recovered as an input tax credit by eligible businesses, the primary impact is on working capital rather than necessarily representing an additional permanent cost. The clarification removes uncertainty surrounding the treatment of imports through these channels.
India imported approximately 232 million ounces of silver during 2025, equivalent to around 20% of global silver demand. Its purchasing activity is therefore significant when assessing the international silver market.
What does this mean for physical gold and silver holders?
The latest developments demonstrate why precious metals prices should not be assessed through a single economic indicator.
Inflation can put pressure on gold and silver when it encourages expectations of higher interest rates. At the same time, persistent concerns about purchasing power, currency stability and financial risk can support longer term interest in precious metals.
Gold ETF holdings provide one measure of investment demand, while central bank purchases and sales offer another perspective. Silver adds a further dimension through its industrial uses and sensitivity to economic conditions.
It is also important to distinguish between owning physical bullion and holding a financial product linked to its price. An ETF provides exposure through a traded security, whereas physical bullion gives the owner direct possession of the metal, subject to the arrangements under which it is held.
Neither approach eliminates price risk, and physical bullion involves considerations such as premiums, storage, insurance and resale costs. However, people who choose physical gold and silver often do so because they value direct ownership rather than relying solely on a financial instrument.
At FirstGold, our focus is on helping Australians accumulate 100% physical gold, silver and platinum bullion over time. Our platform allows customers to purchase bullion in small amounts, build their holdings progressively and arrange collection when the applicable minimum requirements are met.
Market volatility can be unsettling, particularly when prices move sharply in response to economic data. Understanding what drives those movements, and being clear about the difference between price exposure and physical ownership, can help individuals make more informed decisions about their own circumstances.
Gold and silver are not simply about today’s price. For many holders, they are about ownership, diversification and preserving purchasing power over the longer term.
Disclaimer: This article is for general information and educational purposes only. It does not constitute financial advice or a recommendation to buy or sell gold, silver or any other asset. Precious metals prices can rise or fall, and past performance is not a reliable indicator of future results. Individuals should consider their own financial circumstances and seek independent professional advice where appropriate.
