Gold demand surges as record prices and market volatility spur investment

Gold has been breaking records throughout 2025, with a significant increase in demand driven by market volatility and concerns over the global economic outlook. The World Gold Council, the authority on gold mining and investment, reported that the value of gold demand soared 45 per cent year-on-year in the second quarter to an unprecedented $132 billion. In volume terms, demand rose three per cent to 1,249 tonnes.

Investment flows into gold exchange-traded funds led the charge, with inflows reaching 170 tonnes. Louise Street, a senior markets analyst at the World Gold Council, highlighted that gold’s role as a hedge against both economic and geopolitical risks has grown in importance for investors worldwide. Market instability and gold’s remarkable price performance pushed many to seek refuge in the precious metal, which stood at approximately $3,305 per ounce in July.

Funds listed on Asian exchanges played a crucial part in boosting demand, accounting for 70 tonnes in inflows, while US investors also contributed robustly. In Europe, investment more than doubled to 28 tonnes, despite a sharp downturn in physical gold investment in the US, where demand for bars and coins halved to just nine tonnes in the quarter. Chinese and Indian buyers also reinforced the trend, with Chinese demand for physical gold bars and coins up 44 per cent year-on-year to 115 tonnes, and Indian investors adding 46 tonnes.

Central banks continued to steadily accumulate gold, purchasing 166 tonnes in the second quarter, though this marked the slowest pace since 2022. Even so, the volume remained 41 per cent above the quarterly average seen between 2010 and 2021. The World Gold Council’s annual survey indicated that 95 per cent of reserve managers expect global central bank gold reserves to rise over the coming year.

Jewellery demand saw a decline, dropping 14 per cent year-on-year and nearly reaching lows last seen during the pandemic. China and India, the world’s two largest markets, witnessed particularly sharp falls of 20 per cent and 17 per cent respectively. The overall supply of gold climbed three per cent, buoyed by record-high mine production and a modest increase in recycling, which grew four per cent year-on-year despite subdued activity linked to high price levels.

Geopolitical uncertainty and volatile markets have underpinned gold’s robust performance this year. With such a powerful start to 2025, the outlook suggests that gold could experience a period of stable trading. However, should global conditions deteriorate, the appeal of gold as a safe haven may well drive prices even higher in the months ahead.