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Global demand for gold hit record breaking highs in the recent financial quarter, as investors continue to pay significant amounts in order to get their hands on the asset amid fears of missing out on the rally. The precious metal has soared over the course of the year, storming to $4,381 (£3,308.64) this month, with the asset’s value increasing by 44 per cent year on year to $146bn, according to the latest report from the World Gold Council (WGC). The report credited this ongoing increase in demand for the safe haven asset to “heightened geopolitical tensions and stubborn inflationary pressures” as well as investors fears of missing out on gold’s bull run. Louise Street, senior markets analyst at the WGC, said: “Towards the end of the quarter… there was this kind of FOMO effect. “It’s kind of created a bit of a virtuous circle, people seeing the gold price going up, and then that becomes an added reason to invest.” Central banks also increased their buying pace, rising 28 per cent to 220t, following a sluggish few quarters. While the surging price has caused more retail investors to flock to gold, it appears increasingly unlikely that the full year demand for central banks will match levels of the past three years, due to having to pay more to hold the asset. However, reserve managers expect global central banks to increase their gold reserves over the next 12 months. Appetite for ETFS, bars and coins not ending yet Total bar and coin investment rose 17 per cent year on year, exceeding 300t for the fourth consecutive quarter, with the Chinese and Indian markets in particular recording high demand. Appetite for gold-backed exchange-traded funds (ETFs) rocketed, with global inflows hitting a record $26bn. US-listed funds were a major contributor to the rise, adding 139t during the quarter, alongside Asia and Europe funds, with the WGC predicting further growth. Street said: “Although ETF flows have been really significant this year, there’s still a lot of headroom, the market isn’t saturated.” On the other hand, demand for jewellery plummeted, due to concerns over affordability, with demand volumes likely to stay subdued, as long as the gold price remains elevated. Portfolio resilience and the end of gold’s run The record demand comes as more asset managers look to diversify their portfolios with gold, in a bid to create the “perfect hedge” against inflation and protect themselves against the potential burst of the AI bubble. But while many retail investors and fund managers scramble to bolster their gold reserves, some are questioning if gold’s glittering run could be nearing its end, after sliding under $4,000 on Tuesday. Adrian Ash, director of research at Bullionvault, said: “The mood among industry players remains very bullish long term…but dealers and traders are cautious right now because of gold’s rapid ascent and the risk of this sudden pullback marking a deeper correction.” Street is not worried about the recent dip, believing it to be expected. She concluded: “We think that the recent correction has been a healthy dip that you’d expect to see in any asset that’s had a decent run up. “We continue to see the fundamental drivers that have fuelled the rally so far as remaining relevant… nothing in the global environment has changed to the extent that we think that goes away.”
