Gold Demand Shifts Amidst Rising Gold Prices and Uncertain Environment

The World Gold Council, an international organization for gold (headquartered in London, UK), has released its report "Gold Demand Trends Q1 2026," summarizing global gold demand movements. According to the report, global gold demand, including over-the-counter (OTC) transactions, in Q1 2026 increased by 2% year-on-year to 1,231 tonnes. With gold prices rising by approximately 70% during this period, the demand in value terms reached a record high of $193 billion, a 74% increase.

Individual investors worldwide increased their investments due to rising gold prices and gold's positioning as a safe-haven asset, with demand for gold bars and coins reaching 474 tonnes, a 42% increase year-on-year. Notably, demand in China surged by 67% year-on-year to 207 tonnes, significantly exceeding the 155 tonnes recorded in Q2 2013. Purchases of gold bars and coins also increased in other East Asian markets, including India, South Korea, and Japan, indicating a structural shift in gold demand. Japan's demand for gold bars and coins was 3.8 tonnes, which, although small compared to global demand, showed a remarkable increase from the near-zero level (0.2 tonnes) in the same period last year. Similarly, strong demand growth was observed in the United States (up 14% year-on-year) and Europe (up 50% year-on-year).

Demand for gold-backed ETFs (Gold ETFs) remained robust in Q1, with the amount of gold held by Gold ETFs increasing by 62 tonnes. This was primarily due to continued strong ETF demand in Asia, which increased by 84 tonnes during the quarter. Japan also contributed to global ETF demand through investment trusts that invest in domestically listed and overseas listed ETFs. However, in March alone, relatively large outflows were observed, mainly from US-listed ETFs.

In contrast, jewelry demand significantly decreased by 23% year-on-year to 300 tonnes, following the surge in gold prices throughout the quarter. Demand declined in all major markets, with significant reductions particularly in China (down 32% year-on-year), India (down 19% year-on-year), and the Middle East (down 23% year-on-year). Amidst this, Japan remained exceptionally stable globally, showing a flat trend (0% year-on-year). Purchases of gold chains and ornaments with investment implications also seem to have contributed. In value terms, jewelry demand increased by 31% year-on-year, suggesting that consumers maintained their willingness to spend on gold despite record-high gold prices. Nevertheless, in markets where jewelry functions as an alternative investment, such as China and India, it appears that some jewelry demand has shifted to demand for gold bars and coins.

Central banks added 244 tonnes to their gold reserves in Q1, supporting gold demand. Although some public institutions, such as the central banks of the Republic of Turkey and the Russian Federation, and the State Oil Fund of Azerbaijan (SOFAZ), made sales, the increase in gold reserves this quarter exceeded both the previous quarter and the average of the past five years, indicating no change in central banks' stance on accumulating gold reserves. Furthermore, the sales of gold reserves by some central banks observed this quarter highlighted gold's important role as a reserve asset that can provide liquidity even during periods of severe market disruption.

Total gold supply increased by 2% year-on-year to 1,231 tonnes. Mine production recorded a record high for Q1, while recycled supply increased by only 5% despite soaring prices. This suggests that the growth in gold supply is limited, and the overall market continues to experience a tight supply-demand environment.

Louise Street, Senior Market Analyst, World Gold Council

"Entering 2026, gold volatility has been remarkably high, with prices rising above $5,400 per ounce in January before entering a significant but contained correction phase. The momentum of prices combined with rising geopolitical risks led investors to seek safety in physical gold, driving up investment demand, particularly in Asia. In parallel, continuous central bank purchases offset tactical sales."

"Going forward, geopolitical risk premiums are expected to continue supporting investment demand, but prolonged high interest rates could become a headwind, especially in Western markets. Jewelry expenditure is anticipated to remain robust in value terms, even if high prices act as a constraint on a volume basis. On the supply side, mine production is expected to see moderate increases, but potential energy shortages could dampen that outlook."

Atsushi Toda, Head of Japan and Institutional Investor Relations, World Gold Council

"This quarter saw significant fluctuations in gold prices, with both sharp rises and correction phases in the short term. Gold prices have been approximately one year since early 2025."