Amid a high price environment, the World Gold Council (WGC) has reported that total gold demand, including over-the-counter investment, increased by 3% year-on-year to 1 249 t for the second quarter.

In value terms, total gold demand jumped 45% year-on-year to $132-billion.

Gold exchange-traded funds (ETF) investment remained a key driver of total demand, with inflows of 170 t over the quarter, compared with small outflows in the second quarter of 2024.

The report indicates that Asian-listed funds were major contributors at 70 t, keeping pace with US flows. Combined with record inflows in the first quarter, global gold ETF demand reached 397 t, the highest first half total since 2020.

Total bar and coin investment also increased 11% year-on-year, adding 307 t.

The report notes that Chinese investors led the way with a notable 44% year-on-year increase to 115 t, while Indian investors continued to add to their holdings, totalling 46 t in the second quarter.

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

The WGC notes that central banks continued to buy, albeit at a slower pace, adding 166 t in the second quarter. Despite this deceleration, the WGC says central bank buying remains at significantly elevated levels owing to ongoing economic and geopolitical uncertainty.

The WGC says its yearly central bank survey shows that 95% of reserve managers believe that global central bank gold reserves will increase over the next 12 months.

Meanwhile, jewellery demand continued to decline with the volume of consumption down 14% and nearing the low levels last seen in 2020 during the Covid-19 pandemic.

Jewellery demand in China was down 20% and Indian demand fell 17% year-on-year. However, in value terms, the report notes that global jewellery market demand increased to $36-billion.

The WGC says the LBMA (PM) gold price hit a new record in June with an average quarterly price of $3 280.35/oz, up by 40% year-on-year and 15% quarter-on-quarter.

It notes that total supply increased 3% year-on-year, noting that initial estimates for mine production suggest a second quarter record of 909 t.

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

WGC senior markets analyst Louise Street says global markets have navigated a volatile start to the year marked by trade tensions, unpredictable US policy shifts and frequent geopolitical flashpoints.

She comments that the robust investment activity seen in the first half of this year 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 world, she adds.

“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.

“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,” says Street.