Gold Demand Trends: Q2 2025

Our demand and supply expectations for FY2025 reflect the dynamics discussed in our mid-year outlook

• Global gold ETFs have further upside potential in our view, but might face some near-term headwinds before resuming growth in H2 
• Retail investment has been solid and we see only modest softening in H2
• Price has factored heavily in weak jewellery tonnage demand. However, the central case of only modest price gains in H2 are unlikely to produce much of a recovery, given that economic drivers are lacklustre in most regions 
• The technology story is set to continue with the sector challenged by high prices, slower economic growth and tariffs but offset by fervent AI-related spending
• Central bank demand has been revised down modestly to reflect the slowdown in Q2. But our view is that demand continues apace as prices present less of a hindrance in the second half 
• Producers margins increased in H1 and will likely stay high, incentivising a continuation of ramp ups and new mine supply to take production to yet another record level in 2025 
• Recycling is expected to rise but less than implied by gold’s price performance having been heavily influenced by monetisation of old jewellery.

Investment

The US dollar will likely be pivotal to more institutional investment cohorts in H2, and there is both a strong consensus and rationale for a structurally weaker US dollar in the medium term.¹ But a very strong sell off in H1 on the back of tariffs, tax fears and foreign hedging, took the US dollar to well below its yield-differential-implied fair value relative to its main counterpart – the euro.² This risks a short squeeze, which could hamper near-term gold investment.

Gold investors have been less sensitive to changes in long bond yields, as we have detailed on many occasions, and the elevated stock-bond correlation is likely to keep it that way.³ But lower policy rates, expected from September onwards, are likely to elicit more investor interest in gold from an opportunity cost perspective.

Global ETF inflows have been strong in H1 but from quite a low base. The 12-month pace of inflows is not extreme, historically, and we believe there is capacity to add more, particularly given supportive fundamentals. This theme extends to OTC investment. We thus see inflows continuing but perhaps at a lower rate than H1 given the aforementioned near-term challenges.

Chinese retail investment surpassed jewellery in Q2 and is likely to be the go-to for consumers amid volatile and geopolitically tense times. However, strong price increases have been a major contributor to demand and, as such, a more benign price environment might see investment in H2 subside a little from H1.

Similar factors are also evident in India, with prices helping to drive sentiment. One difference perhaps is the role of domestic equity markets. While Chinese economic growth is likely to feel the impact of US tariffs more in H2 than H1, it could prompt further easing.⁴ This should, all else equal, also help relatively cheap equities pick up more steam and possibly put a dampener on gold investment – given that weak equities have been cited as one of the reasons gold has been so attractive over the past couple of years. In contrast, India’s stock market has been on a tear over the last few years and is now quite richly valued. A slightly softer H2 economy vs H1, as consensus expects, might see this anecdotal “gold demand headwind” abate, making gold relatively more attractive.⁵ But this isn’t weak growth, just a tariff brake, as industrial production is set to ramp up.

Jewellery

Jewellery retailers in China are likely to face an equally glum H2. One silver lining perhaps is that platinum is unlikely to offer much of a challenge, given the sensitivity to its strong price rise. Another is that high savings rates might offer some capacity to buy in H2, but probably needs stimulus and a brighter outlook for 2026 and beyond. In India, the economy is still vibrant but is expected to soften a little in H2. Combined with high prices, jewellery demand will likely remain subdued as consumers are anecdotally adapting less quickly to high prices than they have historically.

This theme is likely echoed in other regions. Flat or lower prices won't elicit the same response one might see in an environment where disposable income is solid. Thus, our expectation for weak full year jewellery demand remains in place.

Although a source of supply, recycling is tightly linked to jewellery.⁶ It is particularly relevant in India and China where it traditionally facilitates the flow of new jewellery for old (except for when exchange and collateralised loans are used).

Notably, over the past few quarters, recycling has been constrained in the face of rising prices. The suggested reasons are:

• Geopolitical risk premia – anecdotally evident in the Middle East
• A shift in price sensitivity – a willingness to hold on to gold in the expectation of even higher prices – evident in India with trade-ins and monetisation of gold jewellery
• A lack of economic distress – although slowing, real personal income growth remains positive and there are no imminent signs of distress.⁷

Central banks

A slowdown in central bank buying in Q2 leads us to revise down our FY forecast modestly. But we think the longer-term trend of central banks taking advantage of gold’s diversification properties and reallocating from US assets to gold remains intact, supported by the results of our annual survey.

While target allocations at some central banks may present a ceiling to further accumulation, this is likely not the case for all banks, particularly those whose gold is managed separately from its other reserves assets. In addition, stronger growth in foreign reserves or softer gold prices could reignite buying. Finally, a strong rise in prices should, from a prudential perspective, put the brakes on accumulation, so the Q2 slowdown should not come as a great surprise. We witnessed a similar slowdown in 2024. We remain constructive on central banks in 2025 and beyond, despite the current lull.

Supply

Ramp-ups and new projects led by Ghana, Canada and Chile are likely to increase production to a new record in FY2025, incentivised by high AISC margins. Hedging is expected to be minimal as producers opt for exposure to strong prices. A more material drop in prices, which is a possibility as per our mid-year outlook, could encourage some producers to lock in prices at the margin.

Recycling is expected to rise, but only modestly. One concern is the amount of collateralised jewellery that has been pledged in India. Should there be a significant economic slowdown or should gold prices contract materially, some forced selling could be seen to cover these loans.

Footnotes:

¹Dollar exit could be crowded for some time | Reuters; US Dollar's Shifting Landscape: From Dominance to Diversification - Goldman Sachs Asset Management.

²Outlook for the US Dollar - Apollo Academy

³You asked, we answered: Are fiscal concerns driving gold? | Post by Jeremy De Pessemier | Gold Focus blog | World Gold Council.

⁴Bloomberg median economist forecast is for short-term rates to be 15-20bps lower by Q4’25.

⁵Bloomberg median economist forecast is for real GDP growth to subside to 6.1% from 7.4% in Q1’25.

⁶We estimate that more than 90% of recycling supply comes from old jewellery.

⁷Source: Oxford Economics baseline scenario Q2’25.