Why are gold prices up 44 per cent so far this year?

Gold prices have gained primarily due to fears of higher global inflation, economic uncertainty due to the US’ trade dispute and geopolitical tensions. Australia’s Office of the Chief Economist says that since late 2024, gold prices have been boosted by 3 factors: first, a sharp rise in trade barriers raised concerns over world economic growth and corporate earnings. Then, worries over the US fiscal outlook saw investors take a less favourable view of US Treasury bonds, pushing them to seek alternatives such as gold and the bonds of other nations. Adding to this, in mid-June, hostilities between Israel and Iran pushed prices up further. US multinational investment bank JP Morgan says gold topping $4,000 an ounce (currently $3657) is on the cards, particularly with recession probabilities and ongoing trade and tariff risks.  

What is the outlook on gold investment demand? Will it sustain?

The World Gold Council (WGC) says falling interest rates and continued uncertainty would maintain the investor appetite for gold, particularly via gold ETFs and OTC transactions. At the same time, demand from the central bank is likely to remain robust in 2025, moderating from its previous records, while staying well above the pre-2022 average of 500-600 tonnes. Currently, US investors are buying gold ETFs, leading to the current surge in prices. AOCE says investors and central banks may adopt a more cautious approach to buying gold at record prices, especially if geopolitical and economic worries ease.

How is gold consumption demand holding up this year? Are consumers still buying gold jewellery?

According to WGC, jewellery demand dropped 341 tonnes in the second quarter this year, lower than the 395 tonnes demand in Q2 2024 and 383.4 in Q1 2025. Jewellers say high gold prices are affecting demand. However, they expect consumers to return during the festival period, helped by the savings they could make from the GST cut for cars and FMCG products. Consumers are buying jewellery, but are looking at options such as jewellery studded with diamonds or gems. They are also looking at 18-carat and 14-carat gold. Some Indian customers are opting to exchange their old jewellery for new ones.

Have central banks continued to buy gold in 2025? Which central banks are still buying the yellow metal?

Central banks’ purchase of gold has moderated. It was a meagre 10 tonnes each in July due to the surging prices of the precious metal. The National Bank of Kazakhstan bought 3 tonnes, while the Central Bank of the Republic of Turkey and the Czech National Bank bought 2 tonnes each. The National Bank of Poland is the largest net purchaser of gold in 2025. It bought 67 tonnes till July, though its gold reserves have been virtually unchanged since May 2025. In Q2 of 2025, central banks globally added 166 tonnes of gold to their reserves, a 33 per cent decline, compared with Q1 2025. It was the lowest quarterly demand since Q2 2022. However, their gold buying is about 40 per cent higher than the average quarterly purchases made between 2010 and 2021. 

Are silver prices rallying due to gold prices shooting up?

Not exactly. Silver is outperforming gold this year, rising by over 43 per cent, compared with gold’s 38 per cent in dollar terms. According to The Silver Institute’s World Silver Survey 2025, the white precious metal was expected to outperform gold over the past two years due to supply shortage, but it did not happen. Silver’s “failure to launch” has been mainly due to the macro and geopolitical drivers of the past couple of years being primarily supportive of gold’s more widely accepted quasi-monetary properties. However, robust industrial demand from solar, electric vehicles and electronics, alongside supply constraints, continue to provide underlying support for silver.