Gold slipped Monday after the U.S. and China agreed to a 90-day tariff truce, with the U.S. slashing tariffs from 145% to 30%, while China lowering its rates from 125% to 10%.
The U.S. dollar strengthened as easing tariff concerns lifted market sentiment
In the first quarter of 2025, the demand for gold peaked had peaked as global investors added more gold to their holdings to hedge against the fluctuating US dollar and the growing tariff uncertainty, especially around the trade between U.S. and China.
Total investment demand more than doubled to 552 metric tons up 170% from 204.3 metric tons a year ago, according to the data from the World Gold Council’s Q1 2025 Gold Demand Trends report.
The surge was largely driven by inflows into gold-backed ETFs, which totaled 226 metric tons.
According to Louise Street, Senior Markets Analyst at the World Gold Council,
It’s been a bumpy start to the year for global markets as trade turmoil, unpredictable US policy announcements, sustained geopolitical tensions and a return of recessionary fears have created a highly uncertain environment for investors. In this context, investment demand for gold has paved the way for the highest level of first quarter demand since 2016.
Gold as an investment
In Q1 2025, investors largely drove this surge in demand for the precious metal.
High tariff uncertainty and growing U.S. dollar risk has made gold an increasingly attractive hedge. Looming stagflation and market volatility further has strengthened the case for increased demand for this safe-haven asset.
- Investment accounted for 18% of gold demand in Q1 2024 and rose to 42% in Q1 2025, showing a sharp shift in investor interest.
- Demand for gold bars rose 9% from the previous quarter to 325 metric tons in Q1 this year.
- However the biggest demand came from gold ETFs, with inflows accelerating around the world totaling 226 metric tons in the first quarter of 2025, a huge jump from 19 metric tons in the previous quarter.
Central bank purchases
The value of the U.S. dollar tends to trade inversely with gold, so countries facing tariff risks are aiming to reduce their dependence on the U.S.
- Last year, central bank purchases strengthened gold demand.
- In Q1, central banks bought 244 metric tons of gold reflecting a slowdown from the previous quarter, but this volume still remains within the quarterly range of the past three years.
Asia spurs global gold demand
Asia experienced record breaking inflows in April, accounting for 65% of the net global total – their strongest month on record. The region added gold-backed ETFs worth US$ 7.3 billion according to World Gold Council.
- China led gold demand for the third straight month, exceeding both Q1 and full-year 2024 totals amid rising local prices, equity volatility, yuan depreciation fears, and falling bond yields.
- Chinese gold ETFs’ collective holdings rose 29 metric tons in the first half of April alone.
- In Japan, gold ETFs posted a seventh consecutive month of inflows, while India returned to positive territory after recording outflows last month.
- But demand for North American-listed funds is also attracting investors and this was especially true for the first quarter of 2025 which attracted the highest inflows adding 134 metric tons.
“Looking ahead, the broader economic landscape remains difficult to predict, and that uncertainty could provide upside potential for gold. As turbulent times persist, safe haven demand for gold from institutions, individuals and the official sector could climb higher in the months to come,” says Street.
The Gold Demand Trends Q1 2025 report can be viewed here.