Gold Demand Trends in Q2

Key Concepts

• Gold Demand Trends Report (Q2 2025): A report detailing the performance and drivers of gold demand in the second quarter of 2025.
• Geopolitical Risk: International tensions and conflicts that create uncertainty and drive investors towards safe-haven assets like gold.
• Trade Policy Uncertainty: Global trade disputes and tariffs that impact economic stability and influence investment decisions.
• Safe Haven Motive: The tendency for investors to seek assets that are perceived as stable and less volatile during times of economic or political turmoil.
• Opportunity Cost Motive: The consideration of the potential returns from alternative investments when deciding to invest in gold.
• Gold-Backed ETFs (Exchange Traded Funds): Investment funds that hold physical gold and are traded on stock exchanges, offering investors an accessible way to invest in gold.
• Bar and Coin Demand: Physical gold investment in the form of bars and coins, often favored by individual investors.
• Jewelry Demand: Consumer demand for gold in the form of jewelry.
• Central Bank Demand: Purchases of gold by central banks to diversify their foreign exchange reserves.
• Recycling: The process of melting down and repurposing old or unwanted gold items to create new ones.
• Technology Demand: The use of gold in various technological applications, particularly in electronics.
• AI (Artificial Intelligence): A rapidly developing field that is increasing the demand for gold in its infrastructure and devices.

Gold Demand Trends in Q2 2025: Key Findings

This summary outlines the key findings from the Gold Demand Trends report for the second quarter of 2025, as discussed by Juan Carlos Artiggas and Luis Street. The quarter was characterized by record gold prices, driven by a confluence of factors including a weaker dollar, heightened geopolitical risks, and global trade policy uncertainty.

Investment Demand

The prevailing economic and geopolitical environment in Q2 2025 was highly conducive to gold investment.

• Drivers of Investment:

  • Heightened Geopolitical Tension and Trade Uncertainty: These factors fueled the "safe haven motive," encouraging investors to seek refuge in gold.
  • Weak Dollar and Expected Rate Cuts: A weaker US dollar and anticipation of future interest rate reductions by central banks reduced the "opportunity cost" of holding gold, making it more attractive.

• Gold-Backed ETFs:

  • Record Inflows: Global gold-backed ETFs saw substantial inflows of 170 tons in Q2 2025.
  • Strong First Half: This contributed to the largest inflows for a first half of the year since 2020.
  • Global Breadth: A notable aspect was the global reach of these inflows, with Asian-listed funds showing remarkable participation. Despite being a fraction of the size of North American funds, they matched the 70 tons of inflows seen in North America during the quarter.

• Bar and Coin Demand:

  • Strong Performance in Asia, Especially China: Demand for gold bars and coins in Asia, particularly in China, was robust.
  • Global Increase: Globally, bar and coin investment rose by 11% year-on-year, marking the strongest first half for this segment since 2013.
  • European Recovery: Europe experienced a significant recovery in bar and coin demand over the past couple of quarters, following a weak period of two to three years. This recovery was attributed to both high gold prices attracting flows and an increasing safe haven motive.
  • China's Leading Role: China was a standout performer in the global bar and coin market in Q2. Demand had been elevated for several quarters, but in Q2, bar and coin demand surpassed jewelry demand for the first time in the data series.
  • Drivers in China: The strength in China was driven by the high gold price, a lack of well-performing alternative investments (especially in real estate), and growing concerns about the health of the domestic economy.

• Outlook for Investment Demand:

  • Robust Second Half: Investment demand is expected to remain robust in the second half of 2025, supported by declining interest rates and general market uncertainty.
  • Conditional Pickup: However, significant increases in investment flows are anticipated only if financial or economic conditions deteriorate further.

Central Bank Demand

Central banks continued to be significant buyers of gold in Q2 2025, contributing positively to the market, although at a slightly slower pace than in previous periods.

• Q2 Activity:

  • Healthy Buying: Central banks added 166 tons to global official gold reserves in the second quarter.
  • Slowdown in Pace: This represented a slowdown compared to the surge in buying observed since mid-2022.
  • Above Average: Despite the slowdown, these levels remained healthily above the average quarterly purchases since central banks became net buyers in 2010.

• Central Bank Sentiment:

  • Favorable Outlook: The latest annual Global Central Bank Survey indicated a very favorable sentiment towards gold.
  • Expected Growth: Almost all central banks surveyed expect global gold reserves to grow over the next 12 months.
  • Motivations for Buying: Key drivers for central bank purchases remain gold's role as a safe haven, a diversifier, and its performance during crises.

• Outlook for Central Bank Demand:

  • Slowing Pace in 2025: Central bank demand is expected to slow down in 2025 compared to 2024, though it is still anticipated to remain significantly above the 10-year average.

Jewelry Demand

Jewelry demand in Q2 2025 showed a divergence between volume and value, largely influenced by record gold prices.

• Volume Decline:

  • Global Trend: Consumer demand for gold jewelry declined in volume terms across almost all markets year-on-year, primarily due to affordability issues stemming from the high gold price.
  • Major Markets: China and India, the two largest global jewelry markets, experienced significant year-on-year volume declines, which had an outsized impact on the global total.

• Value Increase:

  • Record Price Impact: Despite declining volumes, the value of gold jewelry spending increased globally. This is a direct consequence of the record high gold prices.
  • Divergence: The measures of volume and value are increasingly diverging.
  • Exception: Iran: Iran was the only market to see year-on-year volume growth in jewelry demand. This was attributed to regional geopolitical impacts and a strong investment motive, with consumers seeking high-carat jewelry as a form of investment.

• Investment Motive in Jewelry:

  • Asia and Middle East: The investment motive is a significant driver for jewelry demand, particularly in Asia and the Middle East.
  • Characteristics: This type of jewelry is typically high-carat (high purity), priced dynamically based on the fine gold content, and consumers are highly aware of its investment value.

Recycling

Recycling of gold in Q2 2025 did not respond as strongly as typically expected in a high-price environment.

• Limited Increase: Recycling was only 4% higher year-on-year.
• Reasons for Muted Response:
  • Lack of Economic Distress: There wasn't a widespread need for individuals to sell gold due to severe economic hardship.
  • Price Expectations: Consumers might be holding onto their gold, anticipating further price increases before selling.
• Interesting Dynamics in India:
  • Putting Gold to Work: Instead of selling outright, Indian consumers were choosing to utilize their gold.
  • Methods: This included exchanging old jewelry for new pieces (trading in) and increasingly pledging gold jewelry as collateral for bank loans or loans from financial institutions.

Technology Demand

While the smallest sector in terms of volume, technology demand for gold has significant implications.

• Challenges:

  • Tariff Uncertainty: Demand in the technology sector faced headwinds due to uncertainty surrounding global tariffs. Suppliers and manufacturers were hesitant due to the potential impact on product demand.

• Support from AI:

  • Critical Component: Artificial Intelligence (AI) is emerging as a significant driver of demand, as gold is a critical component in the infrastructure and devices that enable AI.
  • Positive Outlook: This is expected to be a source of growth for technology demand going forward.

Conclusion

Q2 2025 was a remarkable quarter for gold, marked by record prices driven by a complex interplay of geopolitical risks, economic uncertainty, and a weaker dollar. Investment demand, particularly through ETFs and physical bars/coins, was robust, with significant contributions from Asia. Central banks continued their steady buying, albeit at a moderated pace. Jewelry demand saw a divergence between declining volumes and increasing values due to high prices, with an investment motive playing a growing role. Recycling remained subdued, and technology demand, while facing tariff-related challenges, is poised for growth driven by the burgeoning AI sector. The full report offers more in-depth data and analysis.