Global Gold Demand Surges Amidst Central Bank Purchases and Safe Haven Seeking
Gold demand has reached record levels, fueled by escalating purchases from central banks and investors seeking a safe haven amidst the looming threat of escalating tariffs. On Wednesday, gold prices soared to record highs for the fifth consecutive day, surpassing $2,877 per ounce, with futures also reaching new heights above $2,900.
Central Bank Purchases Drive Demand
According to a report by the World Gold Council, central banks have been aggressively accumulating gold, particularly in the fourth quarter of 2024. Total demand last year hit an unprecedented 4,974 tonnes. Joe Cavatoni, market strategist at the World Gold Council, attributes this to concerns about inflation, geopolitical tensions, and portfolio diversification.
ETF Inflows Support Prices
The Federal Reserve's interest rate cuts have stimulated global inflows into physical-backed gold exchange-traded funds (ETFs), especially from Western investors. In a low-interest rate environment, gold benefits as it does not compete with yield-bearing assets. Global ETF demand remained steady in 2024, marking the first year since 2020 with essentially unchanged holdings, a departure from the significant outflows of the previous three years.
Bullish Outlook Amidst Trade Tensions
Year-to-date, gold prices have risen approximately 8%, surpassing the S&P 500's gains of 23.1%. Goldman Sachs analysts remain bullish on the precious metal, citing continued demand from central banks and ETFs. They maintain a price target of $3,000 per troy ounce for the second quarter of 2026.
US Policy Impacts Demand
Cavatoni highlights that the demand for gold in 2025 will likely be influenced by US policy, such as Federal Reserve rate cuts and the ongoing impact of tariffs. He anticipates that central banks will continue to actively acquire gold, while ETF inflows will be driven by potential interest rate cuts.