Fed Rate-Cut Bets Ignite Precious Metals Rally, Gold ETF Sees Longest Net Inflow Streak in Three Years

As the U.S. core PCE price index fell to 2.4% year-on-year, the lowest in nearly three years, and jobless claims rose for a third straight week, market expectations for a Fed rate cut at the September meeting have surged. Rate futures now show a 78% probability of a 25-basis-point cut, and the dollar index has dropped below 103. With inflation and employment shifting, precious metals have again become a focus for capital.

Gold ETF Holdings: Longest Net Inflow Streak in Four Years

According to the latest data from the World Gold Council, global physical gold ETFs saw net inflows for the fourth consecutive week as of July 30, adding about 28.4 tons. July cumulative net inflows reached 112 tons, the largest monthly amount since March 2022. North America contributed over 60% of the inflows, with Europe and Asia also seeing significant capital.

Financial analysts point out that ETF holdings are a key barometer of institutional sentiment in precious metals. This streak is not isolated—since the Fed's dovish signal in June, gold ETF holdings have risen by more than 180 tons, equivalent to 5.5% of global annual gold production. Spot gold has stayed above $2,850 per ounce and briefly approached $2,880 on July 28, hitting a record high.

Multiple Factors Converge, Institutional Enthusiasm Runs High

• Stronger rate-cut expectations: The yield gap between 2-year and 10-year Treasuries has narrowed to less than 10 basis points. Markets expect an easing cycle, with lower real rates supporting dollar-denominated gold.
• Geopolitical risks persist: Tensions in the Middle East and Eastern Europe show no sign of easing, pushing safe-haven capital into reliable assets.
• Central bank buying and reserve diversification: Several central banks have disclosed gold purchases, with official reserves rising nearly 250 tons last quarter, underpinning ETF demand.

Rate-Cut Cycle Approaching, a Window for Precious Metals Allocation

Goldman Sachs raised its Q4 2026 gold target to $3,000 per ounce, citing a nascent trend of falling real rates. Morgan Stanley noted that gold ETF flows tend to reflect policy paths about two months earlier than rate futures, suggesting institutional investors are already positioning for the easing cycle.

Silver is also benefiting. Although solar-demand growth has slowed, silver ETF (SLV) holdings rose by 15 million ounces in July, up 4.3%. Analysts believe silver, with both industrial and financial attributes, often shows stronger price elasticity in a gold bull market. Spot silver has formed solid support near $42 this week; a break above $42.80 could open further upside.

Platinum and palladium show structural divergence. Vehicle electrification continues to pressure traditional catalyst demand, while South Africa's power supply issues and declining ore grades constrain supply. Platinum trades with wide swings near historical highs, while palladium has seen a technical rebound after last year's sharp correction, though attention remains limited compared with gold and silver.

Outlook and Trading Strategies

This month's U.S. employment data and CPI will be key to validating the rate-cut logic. If jobs data weakens or inflation falls as expected, precious metals could see a smoother rally; if inflation proves sticky, gold may face a short-term correction from recalibrated expectations.

Investors should avoid blindly chasing highs. Pay close attention to whether gold ETF holdings continue to grow and to changes in COMEX net long positions. On execution, consider allocating to gold and silver ETFs on pullbacks, or deploying a gold/silver ratio mean-reversion strategy when the ratio is elevated. Also manage position sizes to mitigate volatility risk.