GOLD: ETF and CB Flows Supportive, But Price Rises Eat Into Jewellery Demand

While the US tariff uncertainty remains a key short-term driver of the gold price, medium/long-term drivers remain its use as a monetary inflation hedge in investment portfolios, a vehicle to build up/diversify central bank reserves and jewellery demand. See below for a summary of recent trends in these three key demand sources, using data from the World Gold Council (WGC): 

• WGC data highlights a sharp increase in gold ETF flows since December 2024, most notably in February (100 tonnes) and March (92 tonnes). In the three weeks to April 18, we estimate an additional 108 tonnes of inflows as US reciprocal tariff volatility moved in focus.
• Central bank gold purchases increased slightly in January (20 tonnes) and February (24 tonnes), up from 13 tonnes in December. The PBOC has been in focus after restarting gold purchases in November, with 28 tonnes of gold acquired over the last five months. However, we note that between November and February, the National Bank of Poland also purchased 53 tonnes of gold.
• Jewellery accounted for 40% of total gold demand as of Q4 2024, spearheaded by the likes of India and China. However, there is evidence of demand destruction as a result of recent price rises, with total jewellery demand down 11% Y/Y in Q4 (and demand from Mainland China seeing a notable 28% Y/Y fall). In India, WGC wrote on April 17 that “Gold's steep climb and ongoing volatility are keeping many consumers on the sidelines, with demand for jewellery continuing to be limited to need based purchases, particularly for weddings“.