Given the pace of investment and price rises, we revise our FY 2025 investment materially higher and our jewellery expectations lower. All other forecasts remain largely unchanged as we head into the final quarter.
Bar and coin buying has been stalwart this year despite the price rally. We maintain our previously positive targets but add a little further upside potential, given a positive outlook for China and India
Fabrication: High prices are likely to remain the biggest obstacle to jewellery demand volumes. Even if they soften in Q4, we think adjustment to such prices will take time to materialise. Our ‘no growth’ technology estimate remains in place, torn between thrifting and AI investment.
Central banks: We revise our central bank expectations modestly higher, encouraged by demand resilience in Q3 in the face of rapid price rises. A broadening of demand is another welcome and supportive factor.
Supply: Ramp ups and high margins continue to incentivise mine production. But outages and revisions might once again disappoint those expecting an annual record. Hedging is expected to be muted.
Recycling continues to surprise in its lacklustre response. Expectations of yet higher prices, lack of economic distress, lack of ready supplies and a preference to use gold for collateralisation are likely culprits. But risks of a surge are not to be discounted in the price environment.
Chart 2: Scope for further investment growth, central bank buying spree continues, fabrication outlook remains weak
The fate of the US dollar remains key for investment decisions, under headlines such as ‘debasement’ and ‘de-dollarisation’. There is some disagreement about how readily these apply; our view is that the reality is more subtle.1 A weaker dollar during the first nine months of 2025 is largely pinned on hedging activity. US assets may have lost some of their exceptionalism but they remain core to most global portfolios. Hedging will just put the onus on them working a little harder for investors, and a marginal shift into less crowded assets is prudent portfolio management.
Anticipated US policy rate cuts is another key pillar for investors. While the opportunity cost motive remains important, the potential consequences of lower rates add more nuance, potentially reflecting a worsening US economy but also stoking fears of inflation; the by-now familiar theme of stagflation, historically supportive of gold.
Gold ETF demand was the standout sector y-t-d. We think the drivers of this demand remain intact even after tonnage holdings eclipsed their 2020 highs. As a share of general portfolios, gold remains under-allocated and a flood of new investors could easily push holdings through the previous peak given the strategic case to do so remains solid.
But there are tactical risks that could derail further inflows. These include: technical sell signals; a continued easing of tariff tensions; geopolitical resolutions; softening fears of US Fed independence; and a rotation out of gold into ‘cheaper’ assets. Such risks naturally proliferate when prices move this fast and holdings approach previous peaks.
Some further profit-taking in Q4 would not come as a surprise following the mid-October sell-off, although the selling appears to have been focused outside of the gold ETF market, possibly driven by Commodity Trading Advisor (CTA) activity.2 We remain optimistic on North American and European demand and view the economic and political backdrop as constructive for resumed buying of any dips. Our forecast is raised and our confidence bands narrowed.
With the FOMO bar and coin trade in full swing – helped along by geopolitical concerns – we maintain our positive full-year estimate. Gold’s rapid price rise has not been a deterrent as it has been on occasion historically. On the contrary, retail activity chasing rising prices should be a boon for the sector, particularly following short-term corrections. This applies broadly across geographies, with China and India seen picking up steam in Q4. Trade tensions and economic pessimism will likely drive Chinese buying, while Indian investors may eschew jewellery in favour of lower margin bar and coin. Anecdotally, softer US bar and coin demand appears to have sharply reversed at the start of Q4.
Fabrication
A glum start to Q3’25 was on the cards for jewellery demand. Although China’s demand in tonnes echoed the lows of the Global Financial Crisis, a q/q pickup and strong spending provided some welcome relief. Any price softness in Q4 will indicate how quickly and confidently consumers adjust to prices. Given how prolonged the slump has been and how strongly prices have risen, the recovery might not be rapid.
Indian volume demand was also weak but did not plumb crisis-level depths. A likely resilient economy ahead should also give us useful statistics on price adjustment in Q4, absent a sharp move higher or lower in prices.
Other regions mirrored consumption patterns in the two largest purchasing centres, one reason models of global demand tend to be quite straightforward to construct. Jewellery responds quite consistently across geographies to price, lagged price adjustments and changes in income. Given no major expected changes in income on a global level in Q4 (albeit that broad income growth remains supportive longer-term), price movements and consumer adjustment are likely to dictate the sectors final quarter tally.
There is little to be added to what we have said previously about technology demand. Price pressure is a constant feature for an industry accustomed to thrifting. But at the same time it continues to benefit from the AI boom. This tug of war will likely flatten demand for the year.
Central banks
Central banks are likely to continue their buying spree. Our full year estimate of between 750-900t – barring any surprises - is lower than last year, but remains – in line with y-t-d flows – surprisingly resilient given strong price rises. Upside and downside risks are balanced, dictated largely by price volatility. However, three factors make us positive on continued demand in Q4 and beyond:
Major EM countries’ FX reserves growth (y/y) is forecast to pick up in Q4
Demand has broadened, with hitherto dormant banks becoming active
The theme of production growth from ramp-ups and new projects led by Ghana, Canada and Australia could take production to a new record in FY2025. However, suspension of a few operations makes the prediction a little less certain.
Strong prices will likely continue to incentivise hedging contracts to expire naturally, and this is likely to remain a negligible feature of total mine supply. But while prices are materially higher than the last quarter, the themes remain unchanged. A more significant price drop, unlikely in our view, could encourage some producers to lock in prices. Although, looking back at the largest drawdowns during recent rallies, our data shows no discernible aggregate rise in hedging (Q4 2008: -49t, Q4 2016: -24t and Q4 2023:+21t )
Recycling continues to undershoot expectations. Distress-selling will likely require a large dent in consumer balance sheets which we have not seen. The selling back we have seen appears opportunistic, and this if often a feature of a healthy rally in its early innings.
Recycling is likely to be muted unless store closures escalate, but there is scant evidence of that from China. We do note caution in India, where a material drop in gold prices could induce forced selling to cover loans collateralised with gold jewellery. All in all, a relatively healthy global economy, alongside widespread expectations of higher prices from analysts are likely reticence of people to sell back.3
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