Gold Surges in Q1 2025 on ETF Rebound, Risk Repricing
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Gold demand posted a solid rebound in the first quarter of 2025, underpinned by a significant reversal in ETF flows and sustained macro-financial instability. According to the World Gold Council, global demand rose 1% year-on-year to 1,206 metric tons—marking the strongest Q1 since 2016—as capital rotation favored defensive allocations amid deteriorating market internals and persistent geopolitical tail risks.
Investment demand led the rally, more than doubling to 552 metric tons. The turnaround in ETF activity was particularly notable, with net inflows of 226 tons compared to outflows of 113 tons in Q1 2024. The Q1 figure also represented a sharp acceleration from Q4 2024’s modest 18.7 tons. This broad-based reallocation into physically-backed ETFs—particularly across Asia, where April inflows have already exceeded the quarterly total—signals heightened demand for liquidity and downside protection. Market participants are reacting to deepening U.S.–China trade frictions, heightened volatility in real yields, and increased stagflation pricing. Chinese investors are notably reallocating away from underperforming equity markets into gold-linked instruments, viewing ETFs as a liquid hedge in an environment of policy and market dislocation.
Despite this shift, global ETF holdings remain 10% below their 2020 all-time high, leaving headroom for further upside positioning. Concurrently, COMEX gold futures hit an all-time intraday high of $3,509.90 per troy ounce on April 22, supported by safe-haven flows and growing concerns over U.S. fiscal sustainability. Year to date, front-month gold futures are up nearly 26%, reflecting both momentum-driven inflows and a structural repricing of systemic risk.
Central banks contributed 244 tons to aggregate demand in Q1, a 21% decline year-on-year but in line with the three-year quarterly average. The data reinforces the view that monetary authorities remain long-term, non-cyclical participants. Their purchasing behavior is relatively insulated from short-term price volatility or tactical shifts and should continue to provide a stable demand floor barring any macroprudential or reserve policy regime change.
By contrast, consumer demand was more sensitive to the price environment. Global jewelry demand contracted 21% year-on-year, impacted by elevated price levels that compressed affordability, especially in key markets such as China and India. Aggregate volumes fell to the lowest point since Q2 2020. However, nominal consumer spending rose 9% to $35 billion, indicating a shift in demand elasticity: while unit volumes dropped, value resilience was observed in most regions except China, where price sensitivity remains elevated.
Technology demand remained flat at 80 tons. Gains from AI-driven applications were neutralized by weakness across wireless, industrial fabrication, and dental segments, where cost pressures limited procurement activity.
In summary, gold’s Q1 performance reflects a macro regime shift characterized by elevated geopolitical risk premia, stagflationary expectations, and the compression of diversification benefits across traditional asset classes. With ETF flows recovering, central bank activity holding steady, and spot prices breaking historical thresholds, the metal remains strategically positioned. Key variables to monitor include real yield trajectories, fiscal deficit expansion, cross-asset correlations, and the persistence of geopolitical risk. These will likely dictate the sustainability of current momentum and the recalibration of positioning across institutional portfolios.
Investment demand led the rally, more than doubling to 552 metric tons. The turnaround in ETF activity was particularly notable, with net inflows of 226 tons compared to outflows of 113 tons in Q1 2024. The Q1 figure also represented a sharp acceleration from Q4 2024’s modest 18.7 tons. This broad-based reallocation into physically-backed ETFs—particularly across Asia, where April inflows have already exceeded the quarterly total—signals heightened demand for liquidity and downside protection. Market participants are reacting to deepening U.S.–China trade frictions, heightened volatility in real yields, and increased stagflation pricing. Chinese investors are notably reallocating away from underperforming equity markets into gold-linked instruments, viewing ETFs as a liquid hedge in an environment of policy and market dislocation.
Despite this shift, global ETF holdings remain 10% below their 2020 all-time high, leaving headroom for further upside positioning. Concurrently, COMEX gold futures hit an all-time intraday high of $3,509.90 per troy ounce on April 22, supported by safe-haven flows and growing concerns over U.S. fiscal sustainability. Year to date, front-month gold futures are up nearly 26%, reflecting both momentum-driven inflows and a structural repricing of systemic risk.
Central banks contributed 244 tons to aggregate demand in Q1, a 21% decline year-on-year but in line with the three-year quarterly average. The data reinforces the view that monetary authorities remain long-term, non-cyclical participants. Their purchasing behavior is relatively insulated from short-term price volatility or tactical shifts and should continue to provide a stable demand floor barring any macroprudential or reserve policy regime change.
By contrast, consumer demand was more sensitive to the price environment. Global jewelry demand contracted 21% year-on-year, impacted by elevated price levels that compressed affordability, especially in key markets such as China and India. Aggregate volumes fell to the lowest point since Q2 2020. However, nominal consumer spending rose 9% to $35 billion, indicating a shift in demand elasticity: while unit volumes dropped, value resilience was observed in most regions except China, where price sensitivity remains elevated.
Technology demand remained flat at 80 tons. Gains from AI-driven applications were neutralized by weakness across wireless, industrial fabrication, and dental segments, where cost pressures limited procurement activity.
In summary, gold’s Q1 performance reflects a macro regime shift characterized by elevated geopolitical risk premia, stagflationary expectations, and the compression of diversification benefits across traditional asset classes. With ETF flows recovering, central bank activity holding steady, and spot prices breaking historical thresholds, the metal remains strategically positioned. Key variables to monitor include real yield trajectories, fiscal deficit expansion, cross-asset correlations, and the persistence of geopolitical risk. These will likely dictate the sustainability of current momentum and the recalibration of positioning across institutional portfolios.