Gold investment demand surges 170% in March 2025 quarter, driven by ETF inflows and Central Bank buying
Gold markets witnessed a historic uptrend in the March quarter of 2025, with investment demand skyrocketing by 170 percent year-on-year, according to the May Alpha Strategist Report released by Motilal Oswal Private Wealth. The surge was largely propelled by a revival in exchange-traded fund (ETF) inflows amid global economic instability, mounting geopolitical tensions, and the weakening US dollar. Despite only a marginal increase in supply, the value of the gold market soared, reinforcing its safe-haven status.
Motilal Oswal Private Wealth highlighted that gold investment demand in the March quarter surged to 552 tonnes, marking a remarkable 170 percent jump compared to the same quarter last year. This spike nearly matched the post-Russia-Ukraine war demand seen in March 2022 quarter. The surge was underpinned by strong ETF inflows globally, with holdings expanding by 226 tonnes in the quarter. European-listed funds added 55 tonnes, bolstered by expectations of further rate cuts from the European Central Bank. Meanwhile, Asian-listed ETFs added 34 tonnes, with a significant portion coming from China due to rising US-China trade tensions. India also posted robust ETF demand, recording an 11 percent increase in holdings.
The report from Motilal Oswal Private Wealth also underscored that geopolitical uncertainty, stock market volatility, and ongoing tariff wars played a key role in pushing gold prices to record levels. Domestically, India's spot gold price surged 23 percent year-to-date to ₹ 93,217 per 10 grams. Globally, the total gold supply stood at 1,206 tonnes in Q1 2025, up by 1 percent year-on-year — the highest level for a first quarter since 2016. While supply rose modestly, the value of the gold market climbed an impressive 40 percent YoY, reflecting the sharp price increase.
Furthermore, Central bank gold purchases remained resilient in March 2025 quarter, as per Motilal Oswal Private Wealth. Total official sector purchases stood at 244 tonnes — 24 percent above the five-year quarterly average, although slightly lower than the preceding quarter. Emerging market central banks led the buying spree, continuing their reserve diversification strategies and reducing exposure to US dollar assets. The persistent uncertainty across global markets reinforced gold's appeal as a reserve asset.
As per the report, the Reserve Bank of India (RBI) added 0.6 tonnes of gold in March 2025, bringing its total holdings to 879.6 tonnes — accounting for 11.7 percent of its total forex reserves. Over the past year, the RBI has increased its gold reserves by 57.5 tonnes. However, recent purchases have moderated, suggesting a more cautious and strategic approach despite gold's growing role in India's monetary reserve portfolio.
Amid record prices, it also noted a significant contraction in global jewelry demand, particularly in India. Jewelry consumption in the country fell 25 percent YoY to 71 tonnes in March 2025 quarter, the lowest quarterly volume since Q3 2020. Still, the value of Indian jewelry demand rose 3 percent YoY, owing to higher gold prices. Consumers adapted by purchasing lighter pieces or exchanging old jewelry for new, with 40–45 percent of transactions involving some form of exchange. The popularity of gold-backed loans also continued to rise. While wedding-related purchases remained relatively stable, they failed to offset the decline in discretionary buying.
Although high prices weighed heavily on jewelry consumption, especially in India, gold remained a core component of strategic reserves and investment portfolios. With geopolitical tensions, market volatility, and interest rate expectations continuing to influence investor sentiment, gold's status as a resilient hedge appears stronger than ever.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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