New Delhi: The gold investment demand saw a dramatic 170 per cent rise (year-on-year) in the January-March quarter, driven by a strong rebound in gold ETF inflows, particularly in India, Europe and Asia, a report showed on Friday.
According to Motilal Oswal Private Wealth’s ‘May Alpha Strategist Report’, in Q1 2025, the gold market experienced a historic surge, with prices reaching record highs amid escalating geopolitical tensions, tariff wars, and a weakening US dollar.
The total supply rose modestly, but the soaring price led to a significant increase in market value.
Central banks maintained robust buying, adding 244 tonnes, signalling continued confidence in gold as a strategic reserve asset, especially among emerging markets.
Meanwhile, jewellery demand declined sharply under the weight of high prices, with India seeing a 25 per cent drop in volume despite a slight rise in value, as consumers shifted to smaller purchases or exchanged old jewellery.
The Reserve Bank of India slowed its gold accumulation but still increased its holdings, reflecting a cautious yet strategic stance. Overall, the quarter highlighted gold's enduring appeal as a hedge against uncertainty, even as traditional consumption showed strain.
The first quarter of 2025 witnessed a dynamic gold market, marked by record-setting prices and notable shifts in demand across various sectors.
Total gold supply reached 1,206 tonnes, a 1 per cent increase year-on-year and the highest for the first quarter since 2016. This slight uptick in demand volumes translated to a significant 40 per cent rise in value, reflecting the surging price of gold.
The main factors fuelling this price are the tariff wars, geopolitical uncertainty, stock market volatility, and US dollar weakness.
The domestic spot gold prices in India also mirrored this trend, rising 23 per cent to Rs 93,217 per 10 grams.
Investment in gold ETFs lead to a significant jump gold investment demand in Q1 2025, reaching 552 tonnes, marking a 170 per cent on-year increase. This level almost matched that seen in Q1 2022 following the outbreak of the Russia-Ukraine war. The surge was primarily driven by a sharp revival in gold ETF inflows, which recorded their strongest quarterly demand for three years.
Global gold-backed ETFs saw holdings increase by 226 tonnes during the quarter, bringing collective holdings to 3,445 tonnes. This was boosted by trade tensions and gold price momentum, with investors rushing for the safety of gold.
The Reserve Bank of India added 0.6 tonnes of gold to its reserves in March, bringing total holdings to a record 879.6 tonnes, or 11.7 per cent of its total foreign exchange reserves.
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