First-quarter demand up 1 per cent to 1,206 tonnes as World Gold Council highlights uncertainty premiums associated with US assets
Growing economic risks and uncertainties pushed first-quarter demand for gold to the highest level since 2016, with prices expected to remain strong for the rest of the year, according to two outlook reports.
“The broader economic landscape remains difficult to predict, and that uncertainty could provide upside potential for gold,” Louise Street, senior markets analyst at the World Gold Council, said in a reported released on Wednesday that showed global gold consumption increased by 1 per cent year on year to 1,206 tonnes in the first three months of the year.
“As turbulent times persist, safe haven demand for gold from institutions, individuals and the official sector could climb higher in the months to come,” she said.
The council’s report echoed one released by the World Bank on Tuesday that said strong safe-haven demand for gold is expected to persist in the near term, buoyed by uncertainty, geopolitical tensions and concerns about volatility in major financial markets.
Chen Zhiwu, chair professor of finance at the University of Hong Kong, said: “Gold has benefited tremendously from the erratic exercise of power by [US] President [Donald] Trump, making the US dollar and dollar assets less trustable and forcing international investors to diversify away.”
He said investors were likely to keep turning to gold unless developments in Washington showed signs of stabilisation.
Central banks have entered their 16th consecutive year of net gold purchases, adding 244 tonnes to global reserves in the first quarter – just under a fifth less than in the same period last year.
The World Gold Council predicted that central banks are likely to continue purchasing gold in quantities similar to those seen over the past three years, driven by elevated trade-related risks and uncertainty premiums associated with US assets.
The World Bank forecast that gold prices are expected to remain more than 150 per cent above their 2015–19 average this year and next, sustained by strong safe-haven demand amid elevated uncertainties and tensions, and by further increases in central bank holdings.
“Gold prices are projected to increase by 36 per cent in 2025, year on year, before softening somewhat in 2026, assuming that policy uncertainty will start to abate,” its report said.
Peng Peng, executive chairman of the Guangdong Society of Reform think tank, said: “Gold prices are up mainly because of the US tariffs on the whole world. Also, the US dollar has gone into a down trend, with US bonds under pressure. Gold is a hedge.”
He said high prices meant Chinese institutions were more likely to buy gold than individual investors.
The price of gold bullion, which hit a record high of more than US$3,500 an ounce last week before losing some ground, remains about a quarter higher this year, Bloomberg reported on Thursday.
The World Gold Council report said demand for gold bars and coins increased by 3 per cent year on year in the first quarter to 325 tonnes, largely spurred by a surge in retail investment in China, which recorded its second-highest quarter of retail demand, offsetting weakness in Western markets.
Gold jewellery demand, however, fell to its lowest point since 2020, reaching 380 tonnes, a 21 per cent year-on-year decline, as gold prices hit 20 all-time highs during the period, affecting affordability.
The report said that with Chinese consumers facing a challenging economic environment, China was the only market to see the value of gold jewellery purchases fall in the first quarter.
Due to slower economic growth and high gold prices, the council said it expected jewellery demand to be weaker in the second quarter, while demand for bars and coins was likely to remain resilient, as investors favoured them in an environment of elevated risk.
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