Gold Demand Trends: Q2 2026

Investment remains the engine, but the mix is changing

Investment should be the main driver of gold demand growth through the remainder of 2026, although a repeat of 2025's exceptional strength looks unlikely.

Demand is expected to be driven increasingly by OTC activity and Asian investment, while gold ETF flows in North America and Europe may be more episodic. Bar and coin demand is also likely to moderate after a strong start to the year, but the forces supporting gold ownership – geopolitical uncertainty, inflation concerns and a shortage of compelling alternatives in some markets – remain firmly in place.

For North American ETFs, the principal near-term headwind is the opportunity cost of holding gold. Higher real yields and shifting expectations for monetary policy could restrain Q3 flows. Markets are currently pricing one rate hike in October 2026, while the US 10-year TIPS yield is edging towards 2.5% – a level traditionally associated with a higher opportunity cost for gold – although a hike, when it arrives, is not a guaranteed negative for gold (Chart 3).

Yet those pressures sit alongside several potential catalysts: a softer US dollar, weaker credit conditions, or a deterioration in equity-market prospects would likely strengthen gold's relative appeal. Furthermore, seasonal factors could provide some support as thinner summer liquidity and portfolio rebalancing have also historically coincided with firmer August performance, while crowded positioning in large-cap tech stocks and the US mid-term election cycle could generate market volatility later in the year that may improve gold's appeal. With speculative positioning less extended than it was earlier in 2026, renewed inflows would not require investors first to unwind crowding to the same degree.

Europe has entered Q3 more positively after lagging other regions, but rising real Bund yields may cap momentum in the absence of a clear catalyst. In Asia, the ETF picture has been softer, yet physical investment should remain resilient.

In China the drivers of first-half bullion demand have changed little: domestic interest rates remain low, geopolitical risk is elevated, the property sector remains weak despite tentative improvement, and the VAT framework favours investment products. Further reports of central bank buying could reinforce investor interest. Indian investors retain their positive expectations for the gold price and have added to holdings on price dips. This is tempered by the potential for a lower-than-normal monsoon, which would impact rural incomes. Taken together, these factors suggest that Asian demand will continue to provide an important counterweight to less consistent Western ETF flows.

Fabrication remains under pressure

Fabrication is likely to remain the weakest component of demand. High prices continue to suppress jewellery tonnage, even where spending remains comparatively resilient: consumers respond by buying fewer, lighter or more investment-oriented products.

China faces the greatest pressure: although targeted stimulus may offer some support, the preference for bars and coins, together with recent VAT changes, is delaying a normalisation in jewellery demand. Our quarterly models indicate that adjustment to a higher price environment occurs gradually, implying that a recovery in volumes could take several quarters even if prices were to stabilise or retreat.

India remains comparatively resilient, but lighter-weight pieces and investment products will likely continue to increase their share of purchases.

Technology demand should benefit from continued AI-related investment, although the balance of risk is becoming less favourable: if returns on that spending disappoint, or the wider electronics cycle weakens, support for gold use in technology could fade.

Central bank demand: strategically strong, but below 2025

Central banks remain on course for another strong year of net purchases. The structural case for gold – diversification, crisis performance, and protection against geopolitical and financial risk – remains well established, and the Q2 recovery is more consistent with the positive intentions captured in our latest Central Bank Gold Reserves survey.

As the Q2 rebound did not fully reverse the revised Q1 demand weakness, we expect annual demand to finish below the 2025 total. Tactical sales linked to liquidity needs or foreign-exchange management remain possible, but these should be viewed against an enduring strategic trend: reserve managers continue to see gold as a long-term diversifier rather than a short-term trade.

A measured supply response

Supply should increase modestly in 2026. Elevated prices and healthy producer margins are expected to lift mine output, but operational constraints and long project lead times will limit the pace of growth.

Recycling has risen only modestly and remains subdued relative to the gold price. Unless H2 brings a decisive directional price move or broader economic stress, a sharp increase in selling back looks unlikely. Expectations of further price gains, limited near-market stocks, and the absence of visible financial distress continue to encourage consumers to hold rather than sell. Collateralised gold in India and old-gold-for-new exchange in China also diminish outright flows into recycling.

Overall, supply is likely to respond positively to the price environment – but only gradually, leaving the market's second-half outlook defined more by the strength and composition of investment demand than by a surge in available metal.