ETF Investors defy record gold prices to lift global gold investment demand

ETF investors stole the gold show in Q2, lifting total global investment demand for gold 78% year-on-year (y/y), and contributing to the strongest semi-annual performance since the recording breaking H1 in 2020. Q2 ETF demand, while a marked turnaround from outflows seen during much of 2024, defied some profit taking as gold cooled from an average record high of US$3,280/oz during Q2, up 40% y/y and 15% q/q.

Investors, including those in Australia, have emerged as key drivers of gold demand as structural shifts and geopolitical turmoil sustain momentum for the rally, according to the World Gold Council’s Gold Demand Trends Report for Q2, 2025.

Expectations of lower interest rates, particularly in the US where the economy appears to be slowing, could provide further tailwinds as investors re-allocate and hedge their portfolios.

Selected Chinese insurers also recently received regulatory approval – for a pilot program – to invest in gold, adding a significant new investor base at a key point in the demand cycle.

ETFs a pillar of demand

Our Q2 2025 Gold Demand Trends report reveals that total quarterly gold demand (including Over the Counter) reached 1,249t, a 3% increase year-on-year amid a high price environment.

Gold ETFs remained a key pillar of investment demand in Q2 as strong inflows in April and June more than offset a modest pullback in May. Combined with record inflows in Q1, global gold ETF demand over H1 2025 reached 397t, the highest first half total since 2020.

This has been reflected in Australia, where investors continue to add gold ETFs to their portfolios. Australian gold ETFs saw continued inflows in Q2, adding US$169m, or 2t for the quarter. Sustained gold ETF demand in Q2 lifted Australian gold ETFs’ total assets under management (AUM) to US$5bn and holdings to 47.3t, both reaching their month-end peaks.

With global risk risking, ETF investors are getting active

ETF investors are now actively embracing gold as traditional assets appear increasingly vulnerable to a broader set of global risks.

The old ‘fear of missing out’ is being superseded by a deeper ‘fear of asset debasement’ as uncertainty grows around the direction of fiat currencies, namely the USD.

In Australia and around the world, investors are adapting to a new and far less predictable market regime.

At the same time, the geopolitical environment and the global trade order are increasingly unpredictable and this is sustaining demand for gold and supporting the price.

The robust investment activity we have seen in the first half of 2025 underscores gold's role as a hedge against economic and geopolitical risks.

Ongoing market volatility, coupled with gold's impressive price performance in recent months, has also generated significant momentum, drawing capital from investors around the globe.

Central banks buying remains at elevated levels

Central banks continued to buy over Q2, albeit at a slower pace, adding 166t in Q2 2025.

Despite this deceleration, central bank buying remains at significantly elevated levels due to ongoing economic and geopolitical uncertainty.

The World Gold Council’s annual central bank survey shows that 95% of reserve managers believe that global central bank gold reserves will increase over the next 12 months.

The survey found that 43% of central bankers believed their own bank would increase reserves, citing gold’s attributes as a diversifier and hedge during crisis and inflation as key factors. 

Bar and coins in demand from Chinese investors

In Q2, total bar and coin investment increased 11% year-on-year, adding 307t.

Chinese investors led the way with demand reaching 115t, while Indian investors continued to add to their holdings, totalling 46t in Q2.

Divergent trends emerged in Western markets as European net investment more than doubled to 28t while US bar and coin demand halved to 9t in the second quarter.

Jewellery demand continued to decline with the volume of consumption down 14% and nearing low levels last seen in 2020 during the COVID pandemic.

Jewellery demand in China was down 20% and Indian demand fell 17% year-on-year. However, in value terms the global jewellery market increased to a total of US$36bn.

Total gold supply increased 3% to 1,249t, with mine production up marginally to a new second quarter record.

Recycling increased 4% year-on-year but stayed relatively subdued considering the high price environment.

Market volatility has investors focused on gold

The robust investment activity we have seen in the first half of 2025 underscores gold's role as a hedge against economic and geopolitical risks.

Ongoing market volatility, coupled with gold's impressive price performance in recent months, has also generated significant momentum, drawing capital from investors around the globe.

Gold recorded a remarkable 26% appreciation in the first half of the year in dollar terms, outperforming many major asset classes.

With such an impressive start to the year, it is possible that gold could trade within a relatively narrow range in the latter half of 2025, based on scenarios analysis from our 2025 Mid-year Gold Market Outlook.

On the other hand, the macroeconomic environment remains highly unpredictable, which may underpin further gains for gold.

Any material deterioration in global economic or geopolitical conditions could further amplify gold’s safe-haven appeal, potentially pushing prices higher still.