Gold Demand Surges in Q1 2025: ETFs Lead, Jewelry Struggles Amid Record Prices

The first quarter of 2025 marked a pivotal moment for gold, with global demand hitting its highest level since 2016. Total demand rose 1% year-over-year (YoY) to 1,206 tonnes, driven by surging investment flows and sustained central bank purchases. Yet this growth masks stark contrasts across key sectors: ETF inflows hit historic highs, while jewelry demand cratered as gold prices climbed to unprecedented levels.

ETFs: The Unsung Heroes of Gold’s Bull Run

Investment demand was the star of Q1, soaring 170% YoY to 552 tonnes, the highest since early 2022. ETF inflows alone reached 226 tonnes, reversing the outflows of 2024 and signaling a return to gold as a safe-haven asset. Retail investors also piled in: bar and coin demand rose 15% above the five-year average to 325 tonnes, with China recording its second-highest quarterly retail investment on record.

This surge was fueled by fears of U.S. tariffs, geopolitical instability, and equity market volatility. North American ETFs led the charge, but Asia emerged as a wildcard: Australian ETFs saw $255 million in inflows in Q1, pushing local gold ETF assets to a record $4.5 billion.

Jewelry: A Victim of Its Own Success

Jewelry demand collapsed 21% YoY to 380.3 tonnes, the lowest since the 2020 pandemic. The culprit? Gold’s price, which averaged $2,860/oz in Q1—up 38% YoY—making it unaffordable for price-sensitive markets like India and Southeast Asia.

Yet there’s a silver lining: consumer spending on jewelry rose 9% YoY to $35 billion, as buyers opted for lighter, higher-value designs. Middle Eastern markets, where gold is culturally entrenched, held steady, while China adapted with innovative, cost-efficient products.

Central Banks: Steady Hands in Turbulent Waters

Central banks added 244 tonnes to reserves in Q1—a 21% YoY drop—but this remains within the range of purchases over the past three years. Poland led with 49 tonnes, while Eastern European nations collectively bought over 80 tonnes since 2024.

This reflects a strategic shift: gold now accounts for 1,000 tonnes annually in central bank reserves, a stark contrast to historical norms. With geopolitical tensions and dollar volatility, gold’s role as a non-correlated, low-risk asset is here to stay.

Technology: Stuck in Neutral

Technology demand flatlined at 80 tonnes, unchanged from 2024. Despite AI-driven growth in electronics, tariff uncertainties and macroeconomic headwinds stalled progress. Analysts warn unresolved trade disputes could further curb this segment.

The Bigger Picture: Why Gold’s Momentum Persists

Gold’s Q1 performance underscores its dual role as both a crisis hedge and a geopolitical barometer. Key drivers include:
- Price Dynamics: Gold hit a record $3,317/oz in April, fueled by fears of U.S. tariffs and a weakening dollar.
- Institutional Shifts: Global ETF holdings remain 18% below their 2020 peak, suggesting room for growth as investors rebalance portfolios.
- Central Bank Allocations: With reserves averaging 1,000 tonnes annually since 2023, demand from this sector is structurally resilient.

Conclusion: Gold’s Bull Market Isn’t Over Yet

The Q1 data paints a clear picture: gold’s diversified demand drivers—investment, central banks, and regional resilience—outweigh the drag from jewelry. Even as prices hit all-time highs, ETF inflows and strategic reserve purchases indicate sustained momentum.

Investors should note two risks:
1. Overbought Conditions: Technical indicators warn of volatility above $3,400/oz.
2. Policy Shifts: A U.S. rate cut or easing geopolitical tensions could temporarily cool demand.

But structural tailwinds—central bank diversification, inflation concerns, and gold’s role as a currency of last resort—suggest this is more than a short-term rally. For now, gold remains the ultimate anti-fragile asset, and its Q1 performance cements its place at the core of prudent investment strategies.

Stay vigilant, but don’t bet against gold in 2025.