Investor appetite for gold ETFs lifts Q1 demand to new highs

Onome Amuge

Gold demand reached its highest first-quarter level since 2016, buoyed by a sharp resurgence in investment via exchange-traded funds (ETFs), according to the latest data by the World Gold Council. This is as total gold demand, including over-the-counter (OTC) investment, edged up one per cent year-on-year to 1,206 tonnes in the first three months of 2025.

Central bank buying, a major driver of gold demand in recent years, saw a slowdown in Q1, with net purchases totalling 244 tonnes. While lower than the previous quarter, this figure remains comfortably within the quarterly range observed over the past three years, the council observed.

The primary catalyst for the overall demand increase was a dramatic revival in gold ETF inflows. Total investment demand more than doubled to 552 tonnes, a 170 per cent year-on-year increase and the highest level since the first quarter of 2022. This surge in ETF interest proved pivotal in supporting gold’s price rally, the report showed.

Demand for gold bars and coins remained strong at 325 tonnes, 15 per cent above the five-year quarterly average. China was a key contributor to this, posting its second-highest quarter on record for retail investment in the precious metal.

Technology demand for gold held steady at 80 tonnes year-on-year. While the ongoing adoption of artificial intelligence continues to drive growth in the electronics sector, uncertainty surrounding potential tariffs is creating a challenging outlook for the remainder of the year.

However, the record high gold price environment took a toll on jewellery demand, which plummeted to its lowest volume since the pandemic-induced disruptions of 2020. Despite this volume decline, the value of consumer spending on gold jewellery still grew by nine per cent year-on-year to $35 billion, underscoring the impact of the soaring price.

Record prices driven by geopolitical uncertainty

The London Bullion Market Association (LBMA) PM gold price continued its record-breaking trajectory throughout the first quarter of 2025. The quarterly average price reached $2,860 per ounce, a 38 per cent increase compared to the same period last year.

Key factors underpinning this price surge included the looming threat of US tariffs, persistent geopolitical uncertainty, ongoing volatility in stock markets, and a weakening US dollar.

In value terms, total gold demand nearly matched the record $111 billion seen in the fourth quarter of 2024. The uptick in demand volumes translated to 40 per cent year-on-year rise in value due to the elevated price levels.

Supply remains stable despite recycling dip

Total gold supply saw an increase of one per cent year-on-year to 1,206 tonnes in the first quarter. Mine production edged up to a new first-quarter record of 856 tonnes. In contrast, gold recycling declined by one per cent year-on-year as consumers appeared reluctant to sell their holdings in anticipation of further price increases.

OTC investment and stock changes had a negative impact on overall demand in Q1. While institutional and high-net-worth investors maintained strong interest in gold, this was offset by other factors, including adjustments in stock levels and a potential shift in investor preference from OTC instruments towards ETFs.