International gold prices have pulled back after a strong rally, but driven by a resurgence of capital inflows into gold ETFs both domestically and globally, alongside expectations of a U.S. economic stagflation scenario, many institutions remain optimistic about the metal's medium-to-long-term trajectory. On Tuesday, international gold prices retreated after a robust advance. During the Asian session, London gold broke through the $4,400 per ounce mark and continued to climb, reaching a high of $4,435.40 per ounce. As of press time, it was trading at $4,370 per ounce. COMEX gold futures maintained their upward momentum, hitting an intraday peak of $4,495 per ounce, just a step away from the $4,500 integer level. Last week, spot gold surged 7.44% in a single week, marking its largest weekly gain this year.
As gold prices re-enter an upward channel, capital is accelerating its return to the gold ETF market, creating a convergence of domestic and international funds. Wang Xiang, the fund manager of the Bosera Gold ETF, cautioned that last week's significant gold rebound occurred against a backdrop of fading bullish sentiment, driven by an expectation gap realized upon data and short-term event impacts, which then attracted trend traders on a technical level. However, uncertainties surrounding geopolitical prospects and the sustainability of the U.S. dollar's movement could both lead to a rapid increase in gold price volatility, urging caution against chasing highs.
Billions of Yuan Flood into Gold ETFs
Recently, domestic and international gold ETFs have been simultaneously attracting capital, with a clear convergence of fund inflows. In the domestic market, gold ETFs tracking the SGE Gold 9999 have become the primary battlefield for capital influx. According to Wind data compiled by 1st Financial, as of August 11, the total scale of seven domestic gold ETFs linked to the SGE Gold 9999 grew by 213 billion yuan in the past week, with net inflows from subscriptions and redemptions exceeding 60 billion yuan. The total scale of these seven gold ETFs reached 2,442 billion yuan, an increase of 332 billion yuan from 2,110 billion yuan at the beginning of July. The capital absorption effect is particularly prominent among leading gold ETFs. For instance, the Huaan Gold ETF recorded net capital inflows for 18 consecutive trading days as of August 7, setting a new record for the longest continuous inflow streak since March 2025, with cumulative inflows exceeding 9.5 billion yuan during this period. As of August 11, the fund's latest scale stood at 1,038 billion yuan. Additionally, the scales of gold ETFs under Bosera, E Fund, Guotai, and China Asset Management reached 427 billion yuan, 364 billion yuan, 343 billion yuan, and 168 billion yuan, respectively.
Overseas markets are also showing a return of funds. The holdings of the world's largest gold ETF, SPDR Gold Trust, have continued to climb, reaching 1,020.96 tonnes as of August 10, an increase of 3.42 tonnes from the previous trading day. According to the World Gold Council, global gold-linked ETFs recorded $3 billion in inflows in July, ending a two-month streak of outflows. The global gold ETF assets under management rose 1% to $530 billion, with total holdings increasing by 23 tonnes to 4,068 tonnes. A research report from Western Securities noted that the U.S. market gold ETF saw net inflows of $1.066 billion last week. Industrial Futures analysis suggests that capital has already begun to return to the gold ETF market and derivatives markets like domestic and international gold futures, with the trend of buying from Asia and Europe gradually strengthening.
Gold Re-enters Upward Channel
With gold prices returning to an upward channel, the market is concerned about how long this rally can last and how high prices can climb. Zhongtai Securities analysis suggests that over the medium to long term, the potential for the U.S. economy to fall into stagflation is the fundamental driver for gold price increases. Historical experience shows that gold has significant allocation value in a stagflationary environment. Reviewing the stagflation period triggered by the oil crisis from 1970 to 1980, gold continued to rise against a backdrop of high inflation and economic stagnation, becoming an important asset for investors to hedge against the erosion of purchasing power. On the macro front, the U.S. July non-farm payrolls data unexpectedly disappointed last week. The U.S. Bureau of Labor Statistics reported that the number of non-farm payrolls decreased by 23,000 in July, while the market had expected an increase of 80,000. The U.S. unemployment rate in July fell slightly to 4.1%, the lowest level since June 2025, below the median market expectation of 4.2%. Following the data release, the implied probability of a Federal Reserve rate hike in September in U.S. interest rate futures markets declined, with the expected rate hike magnitude by December at just 28 basis points, down from 32 basis points before the data release.
"The focus this week is on the U.S. July CPI data," Soochow Securities pointed out. Current market expectations are for a month-over-month increase in the headline CPI due to slightly higher oil prices, while core inflation is expected to rebound modestly. If the inflation data is weak, it will further strengthen expectations for rate cuts; if the data is strong, rising expectations for rate hikes could suppress gold prices in the short term. Looking at a longer cycle, domestic and international institutions have given expectations for gold prices to return to the $5,000 per ounce level. Soochow Securities believes that after six months of volatile consolidation, the fundamentals and technicals of gold are forming a resonance. Gold has entered a right-side move. Around the FOMC meetings in August and September, gold prices are expected to recover to a range of $4,700 to $5,000 per ounce. The new catalysts are likely to come from the non-farm payroll and CPI data released during this period, as well as the global central bank annual meeting. UBS Wealth Management CIO reiterated on August 7 that, considering the potential for U.S. bond yields to trend lower, further weakening of the U.S. dollar, and continued central bank gold purchases, gold prices are expected to break through $5,000 per ounce in the first half of next year, with a target of $5,200 per ounce by the end of June. Standard Chartered Bank also stated recently that gold prices are expected to move back towards the $5,000 per ounce mark. Goldman Sachs maintains a structurally bullish medium-to-long-term outlook for international gold prices in 2026, with its latest baseline forecast targeting a year-end 2026 price of $4,900 per ounce. Guotai Fund judges that against the backdrop of monetary over-issuance and fiscal deficit monetization, the U.S. dollar credit system is facing challenges. Combined with frequent global geopolitical turmoil driving asset reserve diversification, the demand for gold as a safe-haven asset continues to increase, though short-term volatility and consolidation are possible.
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