Central Banks Fuel Gold Rush, Silver Sees Industrial Boost
Central banks' buying spree continues to drive demand for gold and silver. The World Gold Council reports that central banks purchased a record 289 tonnes of gold in Q2, worth around $45 billion. China also bought about 20 tonnes in July.
This surge in gold reserves is expected to continue as major buyers remain committed to buying gold to support reserve diversification. According to the World Gold Council, 45% of central banks would continue to buy gold for this purpose.
Meanwhile, silver's industrial demand remains strong, with a projected sixth consecutive year of annual deficits in 2026 due to increased demand from AI infrastructure, data centers, electronics, automated systems, and the power grid. However, this growth will be partially offset by decreased demand for solar energy due to both thriftiness and substitution effects.
The current driver of silver prices is a combination of lower bond yields, persistent central bank buying, geopolitical risks, and a stubborn Fed resisting declaring victory over inflation.