Q1 Gold Demand Explodes; Investors Rush To Safety As Global Uncertainty Mounts

A new paradigm of economic risk and uncertainty has propelled physical demand for gold as the precious metal sees its best start to the year since 2016, according to the latest report from the World Gold Council.

Global gold consumption increased to 1,206 tonnes in the first three months of the year, up 1% from the first quarter of 2025, the WGC said in its quarterly Gold Demand Trends report, published Wednesday.

In an interview, Joseph Cavatoni, Senior Market Strategist at the World Gold Council, said that the latest data show three robust pillars of support as retail investors continue to buy physical bars and coins, along with a renewed appetite for gold-backed exchange-traded funds.

At the same time, central banks continue to buy gold and diversify their official foreign reserves.

Cavatoni said that the U.S. government’s plan to usher in a new structure in global trade with tariffs on imported goods is creating a lot of uncertainty, which is forcing investors, portfolio managers, and central banks to reassess how they balance out risks in their portfolios.

He noted that frothy risk assets and precarious debt levels are even causing some to question the reliability of U.S. Treasuries.

“ Banks are no longer taking risk capital and putting it to work. I think risk assets move in tandem a lot more likely than they have in the past. And a lot more severely than they have in the past,” he said. “U.S. Treasuries are also being looked at differently than they have in the past. This leaves people trying to find that balance in their portfolios and they are turning to gold.”

Cavatoni also noted that investment demand has also become broad-based, with both Western and Eastern consumers looking for ounces.

“We continue to see natural ebbs and flows in the price, but  we're staying at these elevated levels,” he said. “This is telling us that this is fundamental buying as opposed to just pure push and pull of speculation. Because of this uncertainty in markets,  the case remains strong for us to see gold continuing to be consumed on a very, very large scale, both among investors and central banks.”

Investors flooding back into gold-backed ETFs

While unprecedented gold demand has been driving prices to record highs for the last year, one important segment of the marketplace has been missing, until now.

Investor demand for gold-backed exchange-traded funds has been lackluster, to say the least, in the last few years; however, demand has picked up significantly since January.

According to data from the WGC, 226.5 tonnes of gold flowed into global gold-backed ETFs in the first three months of the year, a sharp contrast to 113 tonnes in outflows reported in the first quarter of 2024.

At the same time, bullion bar and coin demand increased to 325.4 tonnes, up 3% from 317.3 tonnes reported last year.

“Global gold-backed ETFs witnessed a broad-based revival, with investors from across the world adding significantly to their holdings. This has been replicated in investment interest for gold bars and coins, with very few markets witnessing a decline in holdings,” the analysts said in the report.

A new trend emerging in the gold ETF market is that Asian investors are becoming more active, and Cavatoni noted that in the last month, Chinese demand has surpassed North American ETF inflows.

Cavatoni said that it is difficult to see investment demand souring anytime soon. He added that even if geopolitical tensions and economic uncertainty eased, “the genie is out of the bottle” and it will take time to repair damaged relationships and rebuild trust among allies.

“ It's hard to find a scenario that takes gold prices sharply lower,” he said. “ Strategic allocations for the purposes of mitigating risk and uncertainty remain super strong. Investors aren’t necessarily looking at the price and saying, ‘At $3,000, that's too expensive for me.’  They are taking a step back, looking at the broader picture, and seeing gold as a component of their portfolio. I see this as a case for gold prices to be well-supported at these levels.”

Central bank demand off to a slow start

Along with robust investment demand, the WGC says central bank purchases remain a solid pillar in the marketplace, albeit demand has slowed from the record pace set last year.

According to the data, central banks bought 243.7 tonnes of gold between January and March, down 21% from the 309.9 tonnes bought last year.

“While this demand was markedly lower than the previous quarter, in absolute terms it was still healthy at 24% above the five-year quarterly average, and just 9% below the average seen over the last three years of very elevated demand,” the analysts said. “The overall buying trend is now entering its sixteenth year, fresh off the back of colossal buying in the last three years. But what’s next for central bank gold demand? We anticipate that heightened levels of uncertainty will maintain gold’s role as a valuable component of international reserves going forward, and this will support demand in the near term.”

Although the spotlight in the gold market is shining on investment demand and central bank purchases, Cavatoni said that the tech sector is an unsung hero in the marketplace.

The report said that industrial demand consumed 80.5 tonnes of gold in the first quarter, roughly unchanged from last year.

Cavatoni said that with so much uncertainty in the global economy, stable tech demand could be seen as a good sign that the economy is more resilient than some might expect.

“This tells us that demand for high-end consumables remains relatively stable. Consumers are not swapping out their purchases just yet,” he said.

Jewelry demand weakens in Q1

While the gold market has been firing on all cylinders in the first three months of the year, there is one weak pillar in the marketplace.

The WGC said that jewelry consumption was sharply weaker in the first quarter, with global demand falling to 380.3 tonnes, a decline of 21% compared to last year.

Cavatoni said that the decline is not surprising, as consumers couldn’t compete with higher prices. According to the report, demand fell to its lowest level since the 2020 COVID-19 pandemic when the global economy shut down.

“Record gold prices dictated global trends in gold jewellery demand in the first quarter,” the WGC said in the report.

The report noted that Chinese jewelry demand was extremely weak in the first quarter, with purchases falling 35% compared to last year.

“Record gold prices at a time of sluggish income growth and a shift towards pure gold investment products drove a sharp decline in China,” the analysts said. “As the price continued to set new record highs, consumers preferred to sit on the sidelines and/or to shift to lighter-weight, more affordable items.”

Although jewelry demand has struggled in recent months, Cavatoni said that he expects demand to come back if prices stabilize. He explained that volatility, rather than higher prices, spooks consumers.

The WGC report shows that it’s not just investors who have benefited from higher gold prices. The report said that mine supply increased to 856 tonnes, up 1% from 2024.

“Total gold supply increased by 1% y/y to 1,206t in the first quarter. This was driven by record mine production of 856t – an all-time Q1 high in our data series, which dates back to 2000 – and despite a 1% y/y decline in recycling to 345t,” the analysts said.

Source: Kitco