Gold and Silver: Looking Beyond the Correction

Key Takeaways

• A Correction, Not a Reversal: Following exceptional gains in 2025, gold and silver pulled back as tighter financial conditions, a stronger U.S. dollar and deleveraging weighed on prices. In our view, the long-term investment case remains firmly intact. At this writing, gold has sparked renewed investor interest as prices climbed above $4,250 an ounce on Wednesday, 8/5, marking a seven-week high.
• Gold's Fundamentals Remain Strong: Rising sovereign debt, persistent fiscal deficits, central bank reserve diversification and geopolitical fragmentation continue to reinforce gold's role as a strategic monetary asset despite recent volatility.
• Silver's Outlook Is Compelling: Structural market deficits, constrained mine supply and growing demand from electrification, AI infrastructure, renewable energy and advanced manufacturing continue to support the long-term investment case.
• Mining Equities Offer Value: Although precious metals equities have lagged bullion as investors favored large-cap technology and AI, producers continue to generate strong cash flow, maintain healthy balance sheets and trade at attractive valuations relative to their fundamentals.

Performance as of July 31, 2026

Source: Bloomberg and Sprott Asset Management LP. Data as of July 31, 2026.
* BPS stands for basis points. **Bloomberg Indices measure ETF holdings; the ETFGTOTL is the Bloomberg Total Known ETF Holdings of Gold Index; the ETSITOTL is the Bloomberg Total Known ETF Holdings of Silver Index.

Distinguishing Signal from Noise

The first seven months of 2026 demonstrated that cyclical corrections are a normal feature of secular bull markets. While gold and silver retreated from January's record highs, the macroeconomic and structural forces underpinning both metals remain firmly intact.

Gold bullion gained more than 64.58% in 2025, while silver bullion advanced 147.95%, driven by record central bank buying, persistent inflation concerns, rising sovereign debt and growing geopolitical uncertainty. By late January 2026, both metals had extended those gains, reaching new all-time highs as investors continued to seek hard assets amid an increasingly uncertain macroeconomic environment.
The subsequent correction was meaningful but not unusual.

The pullback tested conviction, not fundamentals.

After peaking in January, gold and silver retreated sharply through the end of the second quarter before stabilizing around $4,000-$4,100 per ounce and $55-$60 per ounce, respectively. As of July 31, gold was down 6.33% year-to-date, and silver had declined 19.63%, reflecting silver's inherently higher volatility. Despite these declines, both metals remained well above year-ago levels and have recently begun moving higher again as geopolitical tensions in the Middle East and inflation concerns have encouraged safe-haven demand.

Importantly, the correction reflected cyclical forces rather than deteriorating fundamentals. Rising sovereign debt, persistent fiscal deficits, central bank diversification away from the U.S. dollar, geopolitical fragmentation and, in silver's case, growing industrial demand continue to provide a supportive backdrop for precious metals. Rather than undermining the secular bull market, this year's volatility has tested investor conviction while reinforcing the long-term investment case for both gold and silver.

Figure 1. Gold & Silver Performance (January 2025-July 2026)
Both metals experienced significant volatility in the first half of 2026, yet remain well above year-ago levels.

Source: Bloomberg. Data as of 8/5/2026.

Gold: A Secular Bull Market Interrupted by a Cyclical Correction

Gold's performance during 2026 can be viewed in three distinct phases. The year began with one of the strongest rallies in decades as investors increasingly questioned the long-term sustainability of sovereign debt, widening fiscal deficits and the credibility of traditional reserve assets. Central bank demand remained robust, geopolitical tensions intensified and investors increasingly viewed gold as a neutral reserve asset outside the traditional dollar-based financial system. These forces propelled gold to successive record highs through late January.

Central banks kept buying while investors kept selling.

The second phase began in March as geopolitical events unexpectedly triggered a tightening in global liquidity. Rather than benefiting immediately from heightened uncertainty, gold sold off sharply as leveraged investors liquidated positions to raise cash. Additional pressure emerged during the second quarter following the U.S.-Iran Memorandum of Understanding, falling oil prices, a stronger U.S. dollar and expectations that U.S. monetary policy would remain restrictive for longer.

By early summer, however, much of this selling pressure appeared to have run its course. Gold found support near $4,000 per ounce as physical demand re-emerged and central banks continued accumulating reserves. Although investor sentiment became increasingly pessimistic, the fundamental drivers supporting gold remained firmly intact.

Despite significant price volatility, central banks continued to diversify reserves away from traditional reserve currencies, reinforcing gold's role as a strategic monetary asset. Throughout the correction, official-sector buying helped establish a durable floor beneath the market, illustrating the distinction between cyclical investor flows and long-term structural demand.

Figure 2. Central Bank Gold Demand (2014-2026)
According to the World Gold Council, central bank buying rebounded sharply in Q2 following a Q1 lull.

Source: World Gold Council.

Mining Equities: Fundamentals Remain Strong

Following a strong 2025, precious metals mining equities have retreated in line with bullion prices in 2026, as tighter financial conditions and shifting investor preferences have weighed on the sector. Much of this year's equity market leadership has been concentrated in U.S. large-cap technology and AI-related companies, limiting capital flows into more cyclical sectors, including mining.

Despite the pullback, gold producers continue to benefit from historically high realized gold prices, supporting strong margins, robust free cash flow generation and disciplined capital allocation. Balance sheets remain healthy, capital continues to be returned to shareholders through dividends and share repurchases, and ongoing industry consolidation reflects the strategic value of high-quality assets and reserve replacement. While valuation multiples remain below prior-cycle levels, we believe the sector's underlying fundamentals continue to compare favorably with current equity valuations.

Silver: Greater Volatility, Stronger Structural Tailwinds

Silver has experienced an even more dramatic year than gold. Following record highs early in 2026, silver declined sharply during the second quarter as industrial metals weakened, speculative positions were unwound and investors reduced exposure to economically sensitive assets. Given silver's smaller market size and higher participation by leveraged traders, these corrections were amplified relative to gold.

Structural deficits continue to support silver.

Yet silver's long-term fundamentals remain compelling. Unlike gold, silver derives value from both its monetary characteristics and its expanding industrial applications. Demand continues to grow from solar power, electrification, artificial intelligence infrastructure, advanced electronics and electrical grid investment, while mine supply has struggled to keep pace. The result has been several consecutive years of structural market deficits that continue to draw down above-ground inventories.

Silver's rebound toward > $60 per ounce suggests investors are once again recognizing these longer-term supply-demand dynamics.

Figure 3. Annual Silver Market Deficits (2017-2026)

Sources: Metals Focus, Silver Institute. The Silver Institute: World Silver Survey 2026.

Why We Remain Bullish

As we move through the remainder of 2026, we believe investors should distinguish between cyclical volatility and secular trends.

Much of the market's adjustment to higher interest rates, tighter liquidity, and a stronger U.S. dollar now appears to have been reflected in prices. Meanwhile, the long-term forces supporting precious metals remain firmly in place. Expanding sovereign debt, persistent fiscal deficits, central bank reserve diversification and an increasingly fragmented geopolitical landscape continue to reinforce gold's role as a strategic reserve asset. Silver remains supported by both its traditional monetary role and rapidly growing industrial demand tied to electrification, renewable energy, artificial intelligence infrastructure and advanced manufacturing.

Periods of heightened volatility are rarely comfortable for investors, but they are an inevitable feature of long-term bull markets. In our view, the correction has improved the long-term risk-reward profile for precious metals. For investors able to distinguish cyclical volatility from structural trends, the secular investment case for both gold and silver remains compelling.

Figure 4. Gold and Silver Have Outperformed over the Long Term (2020–7/31/2026)

Source: Bloomberg. Period from 12/31/1999 to 6/30/2026. Gold is measured by the XAU Curncy Spot Price; Silver is measured by the XAG Curncy Spot Price; S&P 500 TR is measured by the SPX; U.S. Agg Bond Index is measured by the Bloomberg Barclays U.S. Agg Total Return Value Unhedged USD (LBUSTRUU Index); and the U.S. Dollar is measured by DXY Curncy. You cannot invest directly in an index. Past performance is no guarantee of future results.