Global gold investment demand skyrocketed in the first quarter (January-March) of 2025, driven mainly by a massive jump in gold ETF inflows, according to Motilal Oswal Private Wealth’s May Alpha Strategist Report.
Investment demand rose 170% year-on-year, marking one of the strongest quarterly increases in recent years.
The surge was fuelled by geopolitical tensions, tariff wars, and a weakening US dollar that pushed gold prices to record highs. Total gold supply grew modestly by 1% to 1,206 tonnes — the highest Q1 volume since 2016 — but the soaring prices caused a 40% increase in gold’s market value.
Gold-backed ETFs played a starring role. Global ETF holdings expanded by 226 tonnes in Q1 2025, bringing total ETF gold holdings to 3,445 tonnes. Europe led with an addition of 55 tonnes, supported by expectations of further ECB rate cuts.
Asia added 34 tonnes, largely driven by Chinese funds reacting to escalating trade tensions with the US. India’s ETF gold holdings also rose by 11%, signalling growing investor appetite.
Central banks remained active buyers, adding 244 tonnes to their reserves, though slightly less than the previous quarter. This demand was 24% above the five-year quarterly average and showed continued confidence in gold as a crisis hedge. Emerging markets dominated central bank purchases, with many reducing US asset exposure amid ongoing geopolitical uncertainty.
In India, the Reserve Bank of India (RBI) increased its gold reserves by 0.6 tonnes in March, bringing its total to a record 879.6 tonnes. This represents 11.7% of India’s foreign exchange reserves. However, RBI’s buying pace has slowed recently, reflecting a more cautious, strategic approach despite gold’s rising importance in reserve management.
Dull quarter for gold jewellery
Meanwhile, gold jewellery demand took a hit due to soaring prices. India saw a sharp 25% drop in jewellery volume to 71 tonnes — the lowest quarterly figure since 2020 — though the value of demand rose 3% year-on-year.
Consumers adjusted by purchasing smaller, lighter pieces or trading in old jewellery for new, with about 40-45% of purchases involving exchanges by the quarter-end. The use of gold loans, where jewellery is pledged as collateral, also increased.
A clear shift
Motilal Oswal’s report highlights a clear shift: While traditional gold consumption faces pressure from high prices, investment demand — especially via ETFs — and central bank buying continue to underpin gold’s role as a strategic asset amid global uncertainty.