How PPI Data Drove Gold’s Two-Month Rally and Pullback

Two consecutive inflation reports arrived this week. On Wednesday, the Consumer Price Index for July showed year-over-year inflation at 3.4%, matching expectations. The following morning, the Producer Price Index for July reported final demand unchanged month-over-month, while annual producer inflation cooled from 5.5% to 4.7%.

Taken together, these readings provide the Federal Reserve with two months of evidence that price pressures are easing. Gold climbed to a two-month high on Wednesday, then ceded some ground on Thursday as energy prices underscored that inflation risks remain. Silver drew renewed attention from institutions after analysts updated price targets. Below are five developments currently shaping gold and silver markets.

What Did the July PPI Report Actually Show, and Why Does It Matter for Gold?

The Bureau of Labor Statistics released the July Producer Price Index showing final demand prices unchanged month-over-month—softer than the 0.2% increase markets had expected. On a year-over-year basis, producer prices rose 4.7%, down noticeably from June’s 5.5%.

The breakdown tells the fuller story: goods prices fell 0.7% in July while services rose 0.2%, and much of the headline improvement was driven by lower energy costs within goods. A narrower core measure, which excludes food, energy and trade services, rose 0.4% month-over-month after barely moving in June. That pickup in core producer inflation often draws greater attention from the Fed than the headline number. Gold initially rallied on the print before pulling back.

At the time of reporting, spot gold traded near $4,376 per ounce, reflecting a short-term retreat of roughly $32 on the day. The pullback is logical: persistent services inflation and higher energy prices mean the Fed has not yet received a clean signal that inflation is behind us.

How Did Two Months of Cooling Inflation Change the Odds of a September Fed Rate Hike?

Before last week’s jobs report, market-implied odds for a Fed rate hike in September were roughly 54%. A weaker-than-expected July payrolls print reduced those odds to about 46%, and the in-line CPI reading pushed them down further to near 40%. Thursday’s softer PPI reinforced that downward trend.

For gold, the effect is direct: lower expectations for rate hikes compress real yields, and lower real yields reduce the opportunity cost of holding an asset that pays no interest. When Treasury real yields fall, gold becomes relatively more attractive versus bonds, which helps explain the immediate market response to the inflation prints. Traders will now focus on the September 17 FOMC meeting as the next major catalyst.

Why Are Gold ETFs Attracting Institutional Money Again After Months of Outflows?

Gold exchange-traded funds recorded consecutive sessions of net inflows this week. SPDR Gold Shares, for example, drew roughly $1.44 billion during the week ending August 7. Global gold ETFs added about $3 billion in July, reversing two months of withdrawals.

This trend suggests earlier redemptions—approximately $6.4 billion between May and June—have largely cleared the market, and longer-term investors are re-entering. Silver ETFs saw inflows during the same period. Spot silver traded around $64.78 per ounce, with the gold-to-silver ratio near 67.6.

By comparison, the long-run average gold-to-silver ratio since 1971 is roughly 60:1. That means silver currently trades at a relative discount to gold of about 13% versus the historical norm. As institutional flows return, that relative cheapness is worth watching for investors who already hold gold.

What Is Behind Citi’s $90 Silver Price Target, and What Would It Take to Get There?

Citi recently reiterated a near-term $75 per ounce silver target and a $90 target over the next six to twelve months, up from a spot price near $65. Their outlook rests on three main drivers.

First, investment demand is displacing industrial demand as the primary driver of price. Second, a de-escalation of tensions in the Strait of Hormuz would likely ease energy-price pressure and weaken the dollar—both factors that would support silver. Third, strong physical demand in India, where domestic premiums run higher than international spot prices, should bolster demand into the wedding and festival season.

Citi also expects the silver market to stay in deficit through 2027, sustained by demand from AI infrastructure, 5G rollouts and electric vehicles. Reaching $90 would represent about a 39% increase from current levels.

Is the Silver Structural Deficit Still Growing, and What Does That Mean for Price?

The Silver Institute’s 2026 survey projects a sixth straight annual supply deficit, estimated near 46.3 million ounces. Physical investment demand is forecast to rise about 20% to 227 million ounces this year. Even though solar manufacturers have cut silver use per panel by roughly 19% through “thrifting,” the deficit is widening because mine production is falling faster than industrial demand.

That imbalance creates a structural floor: as long as annual consumption exceeds production, the amount of silver available for investment is constrained. Structural deficits don’t automatically translate into immediate price spikes—market direction still depends on macro factors like real yields and the dollar—but they do limit the supply buffer and support higher prices over time. Today’s silver price sits well below its January 2026 peak, leaving room for upside if demand continues to outpace supply.

Gold Is Up 10% This Month. So Why Is It Still $1,200 Below Its Record?

Gold has gained roughly 10% this month—its best monthly performance since January’s high—but that rally must be viewed in context. At about $4,376 per ounce, gold remains roughly $1,200 below its all-time peak set earlier this year.

A move above the $4,500 area, near the 200-day moving average, has not yet been achieved. August’s gains reflect a market repricing two things at once: a falling chance of a September rate hike and a geopolitical backdrop that has eased slightly but is not resolved. Both factors support the rally, but neither proves the broader correction is over. The long-term structural case for gold—driven by large sovereign debt burdens and rising interest obligations—remains intact regardless of a single month’s price action.

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SOURCES
1. Bureau of Labor Statistics — Producer Price Indexes, July 2026 (USDL-26-1380, August 13, 2026)
2. Bureau of Labor Statistics — Consumer Price Index, July 2026 (August 12, 2026)
3. CME Group — FedWatch Tool, September meeting probabilities
4. World Gold Council — Gold ETF flows: July 2026
5. Citi — Silver market research note (August 12, 2026)
6. Silver Institute — World Silver Survey 2026
7. GoldSilver.com — Live gold and silver spot prices (August 13, 2026)

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions.

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