The appetite for gold among the world's central banks shows no signs of slowing, even as the gold industry comes off a record year of demand for the precious metal, according to the World Gold Council.
"Geopolitical and economic uncertainty remains high in 2025 and it seems as likely as ever that central banks will again turn to gold as a stable strategic asset," the industry association said in its report on Wednesday.
The outlook comes after the council highlighted an all-time high in annual demand last year, as central banks "continued to hoard gold at a breakneck pace." Gold jewelry was an outlier, with demand declining due to rising prices.
"We expect central banks to continue to call the shots and gold ETF investors to join the fray," the report notes. "Jewelry demand will remain under pressure and we may see further recycling growth. Mining supply is expected to remain robust."
Central banks bought 1,045 metric tons of gold last year, worth about US$96 billion at Tuesday's prices, with Poland, India and Turkey the biggest buyers, the group said. Central banks have been net buyers for 15 years, but the pace of annual purchases has roughly doubled since the outbreak of war in Ukraine as authorities sought to rebalance reserves away from U.S. dollar assets.
"I think the biggest surprise on the demand side is the fact that central banks bought 1,000 tons last year," said John Reade, senior market strategist at the trade body. "There has been ample buying by central banks, and more than we estimated at the beginning of the year."
Gold prices rose 27% over the year as investors sought refuge from conflicts in Ukraine and the Middle East, and central banks turned to cutting interest rates. Total gold demand rose 1% to an annual record 4,974 tonnes last year, the report said.
Rising prices dented jewelry consumption, which fell 11% to 1,877 tons. China was responsible for much of the decline, as jewelry demand fell to second place behind India for the second time in three years.
"China is still the largest gold market; obviously, jewelry demand fell a lot, but investment demand rose," Reade said in an interview. "The relationship between the two could almost be used as a crude measure of economic sentiment within China."
Investor sentiment could improve if the People's Bank of China continues to announce gold purchases, the report said. Central banks' buying motivations tend to be more strategic than those of other investors, and sales have been relatively rare over the past 15 years. As a result, these institutions tend to be less reactive to price movements, which is an important pillar of support for bullion prices.
Bloomberg