by Jack Ryan and Yihui Xie
Investors rattled by the growing global trade war flocked to gold-backed exchange-traded funds in the first quarter, with inflows propelling bullion’s 19% rally in the three-month period, according to the World Gold Council.
Investors added about 227 tons of bullion to gold ETFs in the first quarter, the most since 2022, according to the data gathered by the industry group representing gold miners. The inflows were a key driver in pushing prices to repeated record highs through the quarter, on its path to an all-time high above $3,500 an ounce on April 22.
Bullion-backed ETFs, which hold physical gold on behalf of investors, experienced persistent outflows over the last four years, after holdings surged in the wake of the pandemic in 2020. Those withdrawals continued last year even as gold prices began to rally, suggesting that Western investors, for whom ETFs are a popular way to invest in gold, were largely staying on the sidelines.
An expanding US-led trade war now appears to have brought those Western investors back, as traders seek a safe haven from lagging US equities and a perilous fiscal outlook.
“The missing ingredient for sustained higher prices has been Western demand for gold,” said John Reade, senior market strategist at the World Gold Council. “We’ve got that now via the ETFs. We’re beginning to see improvements coming through in Europe in demand for gold bars and coins, but not in the US yet.”
Total demand for gold rose 1% year-on-year to 1,206 tons, according to the report. While investment demand grew, jewelry demand fell to a five-year low, as high prices pushed consumers to withhold purchases or opt for lighter-weight items.
In China, jewelry demand slumped even as a frenzy for investment products ignited across the country, a shift that reflects the economic uncertainty triggered by Trump’s tariffs.
Large purchases from central banks have been among the most important drivers of gold’s rally, as they seek to diversify foreign-exchange holdings beyond the US dollar and insulate themselves from the threat of sanctions. Central banks bought 244 tons of gold in the first quarter, one-fifth less than the same period last year, although the report’s authors predict buying will remain roughly in line with the elevated levels seen over the previous three years.
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