Gold’s record-breaking rally: who’s keeping it going?

LONDON – Gold prices hit a record USD 3,532 per troy ounce on Tuesday, extending a rally that has boosted them more than 90% since late 2022. Demand is expected to remain robust for some time due to a mix of factors.

Central bank purchases and strong investment demand, visible in inflows into physically backed gold exchange-traded funds, are the main drivers, fuelled by US President Donald Trump’s upending of Western security policy, his trade wars with other countries, and concerns about the independence of the US Federal Reserve.

WILL CENTRAL BANKS KEEP ON BUYING MORE?

Annual net purchases of gold by central banks have exceeded 1,000 metric tons each year since 2022, according to consultancy Metals Focus, which expects them to buy 900 tons this year – twice the annual average of 457 tons in 2016-2021.

Developing countries are seeking to diversify from the dollar after Western sanctions froze roughly half of Russia’s official foreign currency reserves in 2022.

Official numbers reported to the International Monetary Fund reflect only 34% of the 2024 total central bank gold demand estimate, according to the World Gold Council, an industry body.

They have contributed 23% to total annual gold demand in 2022-2025, double the average share recorded during the 2010s.

WILL THE DROP IN THE JEWELLERY SECTOR CONTINUE?

Demand for gold for jewelry, the main source of physical demand, fell 14% to 341 tons in the second quarter of 2025, the lowest since the pandemic-swept third quarter of 2020, as high prices deterred buyers, according to the WGC.

High prices spurred the decline, the bulk of which came from the largest markets – China and India – whose combined market share fell below 50% for only the third time in the last five years, the WGC estimated.

Metals Focus estimated that gold jewellery fabrication fell 9% to 2,011 tons in 2024 and will deliver a 16% slump this year.

ARE PEOPLE STILL BUYING SMALL GOLD BARS AND COINS?

There has been a major shift in appetite for different products in the retail investment market but total purchases in this sector remain robust.

Investment demand for gold bars rose 10% in 2024, while coin buying fell 31%, according to the WGC, which said the trend has extended to this year.

Metals Focus expects net physical investment to rise 2% this year to 1,218 tons as demand in Asia remains high amid positive price expectations.

CAN GOLD ETFs ATTRACT MORE INFLOWS?

Gold ETFs have become a more important source of demand for gold this year, recording inflow of 397 tons in the period from January to June, their largest first half inflow since 2020, according to the WGC.

Gold ETFs total holdings stood at 3,615.9 tons at the end of June, the largest since August 2022. Their record was 3,915 tons five years ago.

Metals Focus expects net investment in ETPs in 2025 at 500 tons after seven tons of outflows in 2024.

(Reporting by Polina Devitt; Editing by Nia Williams)