Global gold demand increased by 3% year-over-year in the first quarter of 2025, propelled largely by robust over-the-counter (OTC) trading activity.
Central banks added 290 tonnes to their official reserves during the quarter, highlighting continued interest in gold as a store of value and a hedge against inflation and currency volatility.
Investment trends were mixed: exchange-traded funds (ETF) experienced net outflows while physical demand for bars and coins remained strong, particularly in major consumer markets such as China and India.
The World Gold Council observed a widening divergence between institutional and retail investor behavior, with institutions reducing ETF exposure even as retail buyers increased purchases of physical gold.
Market dynamics in Q1 2025 reflected several underlying drivers. Macroeconomic uncertainty kept central banks on a steady buying path, reinforcing gold’s role in strategic reserve diversification. At the same time, persistent inflation concerns and fluctuating exchange rates encouraged some investors to favor physical holdings over paper-based products. This split in investor preference contributed to the simultaneous ETF outflows and heightened demand for physical bullion.
Regional patterns were notable. In Asia, retail demand for bars and coins remained robust, supported by cultural affinity for physical gold and improving local distribution channels. China and India accounted for a significant portion of the uptick in physical purchases, while other markets showed more muted retail activity. OTC markets benefited from active dealer-client flows and private transactions, which helped lift overall global volumes.
Supply-side conditions also played a role. Mining output and recycled gold flows helped meet part of the demand, but tightness in some distribution and fabrication channels kept premiums elevated for certain product formats. Jewelers and industrial users showed steady offtake, with seasonal and festival-related buying contributing to demand in key consuming countries.
Looking ahead, analysts expect gold demand to remain sensitive to central bank policies, real interest rates, and geopolitical developments. If inflationary pressures persist or currency instability increases, central banks and investors may continue to favor gold as a reserve and portfolio diversifier. Conversely, a sustained improvement in macroeconomic stability and higher yields could weigh on some forms of investment demand, particularly in ETFs.
In summary, Q1 2025 marked a period of modest growth for global gold demand, driven by robust OTC activity, central bank accumulation, and resilient retail appetite for physical gold in key markets. The divergence between institutional and retail behavior underscores the complex, multifaceted nature of current gold markets.