Asian Gold Demand Plunges Up to 70% as European Investors Flock

Asia’s Physical Gold Demand Weakens as European Investment Flows Rise

Surging gold prices are weighing heavily on physical demand in Asia, according to Commerzbank commodity analyst Barbara Lambrecht. In India, where the price of gold translated into rupees recently reached record highs, imports plunged to just 21 tonnes in June. That level is the lowest monthly total since April 2023 and contributed to a substantial year-on-year decline in first-half imports, which fell about 30% to 204 tonnes. The combination of elevated local prices and price sensitivity among consumers has constrained jewellery purchases and other forms of physical buying in the region.

Swiss export data further underlines the weakness across key Asian markets. Shipments of Swiss-refined gold to China dropped to 16.7 tonnes in June, a decline of roughly 39% compared with the previous month. Exports directed to India were even more sharply reduced, falling by about 71% to under 3 tonnes. Hong Kong also received significantly less Swiss gold, with outbound shipments down approximately 35% to below one tonne. These figures point to a clear pattern: when local prices rise, consumers and wholesalers in price-sensitive Asian markets scale back physical purchases, which depresses imports and trade volumes.

Yet the global gold story in June was not uniformly negative. In Europe, demand dynamics diverged. Swiss exports to the United Kingdom climbed noticeably, reflecting stronger investor appetite for paper gold products—most notably exchange-traded funds (ETFs). According to the World Gold Council, European gold ETFs registered substantial inflows of roughly 23 tonnes in June. That investment-led interest helped offset some of the weakness in physical markets, showing how different segments of global demand can respond in opposite ways to the same price environment.

The contrasting trends illustrate a bifurcated market: physical demand, dominated by consumers in Asia, is sensitive to local currency prices and retail sentiment, while investment demand in Europe and other developed markets can rise even as physical purchases fall. For market watchers, the interplay between these forces matters for price formation. Strong ETF inflows can support prices by increasing paper-backed demand, while collapsing physical imports in large consuming countries like India and China can signal weakening underlying retail appetite.

Several factors help explain the current divergence. In India, rupee-denominated record highs make gold more expensive for ordinary buyers, dampening purchases for jewellery and savings. Chinese demand also fluctuates with seasonal, cultural and macroeconomic factors; weaker shipments from Switzerland to China in June suggest importers and refiners adjusted to slower retail demand. Conversely, European investors often treat gold as a hedge against macroeconomic uncertainty, currency moves or inflation expectations, so inflows into ETFs can accelerate when investors seek portfolio protection.

For traders, analysts and policymakers, these patterns highlight the need to monitor both physical trade flows and financial demand channels. Swiss export statistics provide a timely snapshot of reallocations across regions, while ETF flows reported by authorities such as the World Gold Council offer insight into investor sentiment. Together, these data points help explain why high prices have a differential impact across markets: they can suppress physical buying where consumers are price-sensitive, while simultaneously encouraging investment purchases in markets where gold is seen as a strategic asset.

Looking ahead, the balance between subdued Asian physical demand and resilient European investment inflows will be a key determinant of near-term price dynamics. Should local prices in India and China ease or seasonal purchasing pick up, physical imports may recover, narrowing the current gap. Alternatively, sustained ETF inflows in Europe and other regions could continue to provide price support even if physical consumption remains muted. Observers will be watching monthly trade and ETF data closely to gauge which trend dominates in the coming quarters.