Gold Investment Up 170% in Q1 FY25 as ETF Demand Soars; Jewellery Sales Drop Due to High Prices: Motilal Oswal

Gold investment demand witnessed a massive surge in the first quarter of 2025, with a 170% year-on-year (YoY) increase, primarily led by revived interest in gold Exchange Traded Funds (ETFs), according to Motilal Oswal Private Wealth's Alpha Strategist Report of May 2025. The quarter marked a historic phase for the yellow metal, with global gold prices touching record highs amid escalating geopolitical tensions, tariff wars, and a weaker US dollar.

Gold Investment Demand Soars 170% in Q1 2025: Motilal Oswal Report

In Q1 FY2025, the total global supply of gold increased slightly by 1% compared to the same period last year, reaching 1,206 tonnes, the highest for a first quarter since 2016. However, due to a sharp rise in prices, the overall market value of gold went up by 40% year-on-year, showing that investor interest remained strong even though actual gold volumes didn't grow much.

Investment in gold reached 552 tonnes in the first quarter, which was mainly because a lot of people started putting money back into gold ETFs. This was the highest demand for gold ETFs in the last three years.

Global Gold Supply Hits 9-Year High

Globally, gold-backed ETFs received 226 tonnes of new investment, increasing total holdings to 3,445 tonnes. In Europe, gold investments rose by 55 tonnes as investors expected the European Central Bank (ECB) to cut interest rates, which often makes gold more attractive. In Asia, especially China, there was an increase of 34 tonnes, mostly due to growing trade tensions with the United States, which made gold a safer choice.

In India, gold ETF investments went up by 11%, showing that more investors prefer to buy gold in financial form rather than as jewellery or physical gold.

Gold Spot Price in India

In India, gold prices followed the global trend, with spot prices rising by 23% since the start of the year, reaching Rs 93,217 per 10 grams. This sharp increase has made gold less affordable for many traditional buyers.

Central Banks and RBI's Gold Holdings Hit Record Levels

Central banks around the world bought 244 tonnes of gold in Q1. Although this was slightly less than the previous quarter, it was still 24% higher than the five-year quarterly average. The ongoing uncertainty in global markets is pushing central banks-particularly in emerging economies-to hold more gold and move away from US dollar-based assets.

The Reserve Bank of India (RBI) added 0.6 tonnes of gold in March, taking its total holdings to 879.6 tonnes, or 11.7% of its foreign exchange reserves. Over the past year, the RBI has added 57.5 tonnes, increasing the share of gold in its reserves by nearly 4%. However, its pace of buying has slowed in recent months, pointing to a more measured, strategic approach.

Drop in Gold Jewellery Investment

While investment demand surged, jewellery demand fell sharply due to high gold prices. In India, it dropped by 25% year-on-year to 71 tonnes, the lowest since the third quarter of 2020. Still, the value of jewellery sales rose by 3%, as prices went up.

Indian shoppers adjusted by buying lighter pieces, delaying purchases, or exchanging old jewellery. By the end of the quarter, 40-45% of jewellery purchases reportedly involved some form of exchange. The trend of using gold loans-where jewellery is pledged as security-also continued to grow.