Why Rising Gold Prices Are Shifting Demand From Jewellery to Investment

Surging gold prices and rising geopolitical uncertainty are reshaping how people and institutions buy gold worldwide. According to the World Gold Council, investors are increasingly turning to gold as a safe-haven asset rather than purchasing it primarily as jewellery.

The report says, “Surging gold prices and heightened geopolitical uncertainty are driving a shift in global gold demand from jewellery to investment, even as overall demand remains stable.”

This shift reflects a broader behavioural change, where gold is being treated less as a consumption product and more as a financial asset.

How much has global gold demand changed?

Global gold demand has remained broadly stable in volume terms but surged significantly in value. The report notes that “Total gold demand, including over-thse-counter (OTC) transactions, rose marginally by 2 per cent year-on-year to 1,231 tonnes in the first quarter.”

However, the real story lies in value. “The value of demand surged 74 per cent year-on-year to a record USD 193 billion,” highlighting the impact of sharply rising prices.

Why are investors buying more gold bars and coins?

Retail investors are driving a major increase in demand for physical gold investments such as bars and coins. The report highlights that “bar and coin demand… jumped 42 per cent year-on-year to 474 tonnes.”

This trend is especially strong in Asia. “China led this surge, with demand rising 67 per cent to a record 207 tonnes,” while India, South Korea and Japan also saw increased buying.

Even Western markets are following suit. The report notes that bar and coin demand rose “14 per cent in the United States and 50 per cent in Europe.”

This indicates a global shift where individuals are increasingly using gold as a hedge against uncertainty.

What role are gold ETFs playing?

Gold exchange-traded funds (ETFs) are also benefiting from this trend. The report states that “Physically-backed gold exchange-traded funds (ETFs) saw net inflows of 62 tonnes.”

These inflows were largely driven by Asian markets, although “outflows in March from US-listed funds moderated the overall growth.”

This suggests that while institutional investment remains strong, regional differences still influence global flows.

Why is jewellery demand falling?

Rising gold prices are discouraging traditional jewellery purchases. According to the report, “jewellery demand declined sharply by 23 per cent year-on-year to 300 tonnes.”

This decline is visible across key markets such as China, India and the Middle East, where gold jewellery has historically been a major part of consumption.

However, the report adds an important nuance: “part of this decline reflects a shift towards bar and coin investment, particularly in markets where jewellery serves as a proxy for savings.”

Interestingly, even though volumes fell, spending did not collapse. The report notes that “despite lower volumes, the value of jewellery demand increased,” indicating that consumers are still buying—but less in quantity due to higher prices.

Are central banks still buying gold?

Yes, central banks continue to play a crucial role in supporting demand. The report states that “Central banks continued to underpin demand, adding 244 tonnes to global reserves during the quarter.”

This level of buying exceeds both the previous quarter and the five-year average, even though some institutions sold gold.

Central bank demand reinforces gold’s role as a strategic reserve asset during uncertain times.

What is happening on the supply side?

Gold supply has kept pace with demand growth. The report notes that “total gold supply increased by 2 per cent year-on-year to 1,231 tonnes,” matching demand levels.

Mine production reached a record for the first quarter, while recycling rose modestly by 5 per cent. However, the relatively small increase in recycling suggests that high prices have not yet triggered a large supply response.

Why does gold remain a safe-haven asset?

The underlying driver behind all these trends is uncertainty. The report concludes that “increased price volatility and geopolitical risks supported investment demand, particularly in Asia, reinforcing gold's role as a safe-haven asset.”

In times of economic and political instability, investors often shift towards assets that preserve value—and gold continues to serve that role globally.

(With inputs from ANI)