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Gold has once more reaffirmed its position as the cornerstone for financial stability. For the first quarter of 2025, the global demand for gold exploded to levels not witnessed since 2016. Instigated by the hefty purchases of central banks, this increase indicates growing worries about the stability of the economy, inflation, and geopolitical uncertainty.
Based on the World Gold Council, total gold demand in Q1 2025 was 1,206 tonnes which is a 1% increase from the same timeframe in 2024. While this might appear to be just a minor increase however, a closer inspection will reveal the sweeping shift taking place in global financial systems - one where gold is taking the centre of the stage once again.
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Central banks were among the most known buyers in the global gold market during Q1 2025, accounting for 244 tons of gold transactions. It represents 24% more than the five-year average quarterly and demonstrates a consistent upward trend of strategic accumulation. This is another consecutive period with central bank purchases of more than 200 tonnes. This pattern demonstrates gold's increasing importance in sovereign reserve strategies.
As tensions in the geopolitical world escalate between the major economic blocs, like the U.S., China, and Russia, Numerous countries are looking for dependence on the U.S. dollar. By diversifying into gold, they can reduce their exposure to dollar-based financial systems and gain greater independence.
Global inflation, although still well below its 2022 peak, is still a major concern for several economies. Banks are now focusing on gold as an investment that can protect against currency depreciation and inflation. This is particularly in emerging markets where inflation may be more unpredictable.
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Conflicts over trade, wars, and political tensions in Eastern Europe, the Middle East, and Asia have highlighted the fragility of the global order. During uncertain phases, gold can be viewed as a safe-haven asset. You can call it a financial life refuge from geopolitical storms.
In the scenario of sanctions and possible asset freezes, countries are searching for reserves that can't be seized or easily controlled from foreign power. Gold falls into this category perfectly.
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Gold investment demand also saw a significant increase the first quarter of 2025, nearly increasing by doubling to 552 tonnes. This is a 170% increase when compared to the same time from last year. The main reason for this increase was gold exchange-traded funds inflows which had an important factor in the rise of gold's price.
The quarterly average gold price was around $2,860 an ounce during Q1. This is an increase of 38% from year to year. The price increase attracted a wide range of investors, ranging from institutional players to retail investors - all those seeking to secure their investments and potential gains by gold.
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Physical demand for gold, which includes coins and bars, remained high at 325 tonnes in Q1 2025, which is 15% more than the five-year average quarterly. China was the main contributing factor to this growth with the second highest quarterly retail investments. This steady demand highlights gold's popularity with investors of all kinds especially in countries where gold has significant cultural and economic value.
In Europe, gold coins were particularly popular with the retail investors of Germany, Austria, and Switzerland. These countries considered physical gold as a way to counterbalance against volatile fiat currencies.
In contrast to the impressive growth in the investment sector, gold jewelry demand saw significant declines in Q1 2025. It reached the lowest levels since the beginning of the COVID-19 pandemic in the year 2000. The volume fell 19% year-on-year, which created a record for high gold prices and reduced the affordability of jewelry for consumers.
However, in terms of value the amount of money spent on gold-plated jewelry increased by 9% from year-to-year, reaching $35 billion. While fewer pieces of jewelry were purchased, spending remained stronger. This reflects the increased prices and the continued interest of consumers in the gold market as a luxury item.
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The technological demand for gold remained steady at around 80 tonnes in Q1 2025. This was similar to the prior year. The constant use of technology like artificial intelligence and other advanced technologies continue to spur expansion in the electronics industry where gold is used because of its high conductivity and durability.
However, uncertainty regarding trade and tariffs poses issues for the industry and could affect the demand for the future. Despite this the fundamental characteristics of gold guarantee its use in future high-tech applications.
In terms of supply, the total gold production increased by 1% year-on-year, reaching 1,206 tonnes during Q1 2025. Mining production accounted for 856 tonnes, which is an increase of just 1% from the prior quarter. Gold recycling was relatively stable, with a small 1 percent decrease year-over-year.
The constant supply, combined with the booming demand, has aided in the rising pressure on the price of gold. However, logistical issues and delays in delivery have been reported, especially in the major hubs for gold trading like London and New York.
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For the coming years, the prospects for gold demand for gold for 2025 are positive. Central banks are likely to keep buying gold in the same elements driving their purchases in recent times. The demand for investment might continue to be strong, bolstered by the ongoing economic uncertainty and the attraction in gold's role as a secure asset.
But, risks like geopolitical tensions or trade tariffs might create volatility in the gold market. Investors need to remain up-to-date and take into account these issues when making investments.
The first quarter 2025 proved that gold is still among the top reliable assets during the ongoing global uncertainty. The demand for gold is continuously rising across different sectors, including central bankers to private investors. The jewelry demand softened due to high prices. The investment and official sector purchases have more than compensated, pushing gold to record highs.
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Central banks increased purchases to diversify their reserves, hedge against rising inflation and lessen dependence on the U.S. dollar in the scenario of geopolitical tensions.
High gold prices made the value of jewelry affordable. This is particularly in the key markets like India and China which led to a decrease of 19% in the sales volume, despite an increase of 9% in the total spending value.
Yes. The ongoing central bank purchases with economic uncertainty and possible supply restrictions suggest that gold demand and prices might remain strong for the remaining year.
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