World Gold Council: Gold investment demand reignites, with ETFs becoming the focus
2025-08-01 11:30:26
Retail investors have flocked back into the gold market, reigniting global demand for the metal amid rising economic uncertainty and record prices, the World Gold Council (WGC) said.
In its Q2 Gold Demand Trends report, the WGC highlighted that even with record high gold prices, demand for gold remained broad-based in the second quarter. Total gold demand, including over-the-counter (OTC) investment, rose to 1,249 tonnes in the April-June period, up 3% from the second quarter of 2024.
The WGC attributed the surge in gold prices primarily to strong investment demand for gold-backed exchange-traded funds (ETFs). However, the report also noted strong demand for gold bars and coins, which typically struggle in high-price environments. Analysts noted that rising economic uncertainty appears to be driving demand for physical gold as a safe haven.
“Two consecutive quarters have produced the strongest first half of the year for investment in gold bars and coins since 2013,” the report said.
In a notable counter-trend, the agency observed a divergence in demand for jewelry despite rising prices. While global gold purchases for jewelry declined, overall spending increased, the analysts reported.
The report said global jewelry consumption fell 14% to 341 tons in the second quarter, the lowest level since the third quarter of 2020. However, annual jewelry consumption in value terms increased 21% to $36 billion.
While the gold market is experiencing broad-based growth, investment demand has once again become the dominant segment of the market. According to the WGC, total investment demand increased by 78% year-on-year to 477.2 tons.
Western investors returned to gold ETFs, with inflows in the first half of this year reaching their highest level since 2020. However, investment demand from Asia's major economies continued to lead, with a year-on-year increase of 44% in the second quarter.
"The same themes that created such fertile ground for gold investment in the first quarter continued to play a significant role in the second quarter: volatile US trade policy, a depreciating dollar, heightened geopolitical tensions punctuated by regional flashpoints, close monitoring of inflation and growth trends, and record high gold prices that attracted further investment inflows," the analysts said.
In the second quarter, 170 tons of gold flowed into ETFs. Looking ahead, the WGC said there is still room for growth in ETF demand.
They added: “Historically, the pace of 12-month inflows has not been extreme, and we see capacity to add more, especially given the favorable fundamentals. This theme extends to OTC investments. As a result, we see inflows continuing, but likely at a slower pace than in the first half of the year.”
While easing risk aversion concerns have weakened demand somewhat, gold remains a key diversification tool for investment portfolios.
"Gold investors are less sensitive to changes in long-dated bond yields, as we have detailed on numerous occasions, and the rising correlation between stocks and bonds is likely to keep this going," the analysts said.
The WGC also expects investment demand to pick up as markets anticipate the Federal Reserve may begin cutting interest rates in September. Lowering rates would lower bond yields and weaken the dollar, two positive factors for gold prices.
Excluding paper gold, the WGC reported that global gold demand rose to 370 tons, an increase of 11% over last year.
Central bank gold purchases remain a key pillar of global demand, but slowed in the second quarter, prompting analysts to revise their year-end price targets.
Central banks added 166 tonnes to official gold reserves in the second quarter, a 21% decrease compared to the second quarter of 2024. This marked the second consecutive quarter of declining demand.
Analysts said the slowdown was unsurprising given record high gold prices. Still, demand in the first half of the year was 41% above the long-term average.
“We witness a similar slowdown in 2024. Despite the current calm, we remain constructive on central banks for 2025 and beyond, with strong reserve growth or weaker gold prices potentially reigniting buying,” the analysts said.
Spot gold daily chart Source: Yihuitong
At 11:30 Beijing time on August 1, spot gold was quoted at $3292.66 per ounce.
In its Q2 Gold Demand Trends report, the WGC highlighted that even with record high gold prices, demand for gold remained broad-based in the second quarter. Total gold demand, including over-the-counter (OTC) investment, rose to 1,249 tonnes in the April-June period, up 3% from the second quarter of 2024.
The WGC attributed the surge in gold prices primarily to strong investment demand for gold-backed exchange-traded funds (ETFs). However, the report also noted strong demand for gold bars and coins, which typically struggle in high-price environments. Analysts noted that rising economic uncertainty appears to be driving demand for physical gold as a safe haven.
“Two consecutive quarters have produced the strongest first half of the year for investment in gold bars and coins since 2013,” the report said.
In a notable counter-trend, the agency observed a divergence in demand for jewelry despite rising prices. While global gold purchases for jewelry declined, overall spending increased, the analysts reported.
The report said global jewelry consumption fell 14% to 341 tons in the second quarter, the lowest level since the third quarter of 2020. However, annual jewelry consumption in value terms increased 21% to $36 billion.
While the gold market is experiencing broad-based growth, investment demand has once again become the dominant segment of the market. According to the WGC, total investment demand increased by 78% year-on-year to 477.2 tons.
Western investors returned to gold ETFs, with inflows in the first half of this year reaching their highest level since 2020. However, investment demand from Asia's major economies continued to lead, with a year-on-year increase of 44% in the second quarter.
"The same themes that created such fertile ground for gold investment in the first quarter continued to play a significant role in the second quarter: volatile US trade policy, a depreciating dollar, heightened geopolitical tensions punctuated by regional flashpoints, close monitoring of inflation and growth trends, and record high gold prices that attracted further investment inflows," the analysts said.
In the second quarter, 170 tons of gold flowed into ETFs. Looking ahead, the WGC said there is still room for growth in ETF demand.
They added: “Historically, the pace of 12-month inflows has not been extreme, and we see capacity to add more, especially given the favorable fundamentals. This theme extends to OTC investments. As a result, we see inflows continuing, but likely at a slower pace than in the first half of the year.”
While easing risk aversion concerns have weakened demand somewhat, gold remains a key diversification tool for investment portfolios.
"Gold investors are less sensitive to changes in long-dated bond yields, as we have detailed on numerous occasions, and the rising correlation between stocks and bonds is likely to keep this going," the analysts said.
The WGC also expects investment demand to pick up as markets anticipate the Federal Reserve may begin cutting interest rates in September. Lowering rates would lower bond yields and weaken the dollar, two positive factors for gold prices.
Excluding paper gold, the WGC reported that global gold demand rose to 370 tons, an increase of 11% over last year.
Central bank gold purchases remain a key pillar of global demand, but slowed in the second quarter, prompting analysts to revise their year-end price targets.
Central banks added 166 tonnes to official gold reserves in the second quarter, a 21% decrease compared to the second quarter of 2024. This marked the second consecutive quarter of declining demand.
Analysts said the slowdown was unsurprising given record high gold prices. Still, demand in the first half of the year was 41% above the long-term average.
“We witness a similar slowdown in 2024. Despite the current calm, we remain constructive on central banks for 2025 and beyond, with strong reserve growth or weaker gold prices potentially reigniting buying,” the analysts said.
Spot gold daily chart Source: Yihuitong
At 11:30 Beijing time on August 1, spot gold was quoted at $3292.66 per ounce.
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