Central banks on track for 4th year of massive gold purchases, Metals Focus says

Metals Focus projects central banks will continue their significant gold accumulation, purchasing 1,000 metric tons in 2025, marking the fourth consecutive year of substantial diversification from dollar-denominated assets; this trend is supported by geopolitical tensions, economic uncertainty, and a lack of confidence in the U.S. dollar. Despite a 9% drop in jewellery fabrication in 2024 and a projected 16% slump in 2025 due to rising gold prices, central bank demand remains robust, with average gold prices expected to reach $3,210 per ounce in 2025, a 35% increase from 2024.

Analysis

Central banks are on track for a fourth consecutive year of substantial gold purchases, with Metals Focus forecasting 1,000 metric tons in 2025, driven by a strategic diversification from dollar-denominated assets amid geopolitical tensions, economic uncertainty, and eroding confidence in the U.S. dollar and Treasuries. This de-dollarization trend, potentially amplified by U.S. President Trump's policies and the deteriorating U.S. fiscal outlook, underpins robust central bank demand, which constitutes nearly a quarter of total gold consumption, despite an anticipated 8% decline in their purchases from 2024's record 1,086 tons. Poland, Azerbaijan, and China continue to be significant buyers. Gold prices have surged 29% year-to-date, reaching a record $3,500 per ounce in April, and Metals Focus projects an average price of $3,210 in 2025, a 35% increase from 2024, with further strength expected into 2026. However, this price rally has severely impacted jewellery demand, which fell 9% in 2024 and is forecast to plummet by 16% in 2025, primarily in India and China. While total gold supply is expected to see a modest 1% rise in 2025 to 5,087 tons, total demand is projected to fall by 9% to 4,246 tons, leading to an increased market surplus of 840 tons, factoring in a significant positive swing in ETP net investment from -7 tons in 2024 to a projected 500 tons in 2025.

Key Decisions for Investors

• Investors should consider maintaining exposure to gold, given the persistent central bank demand driven by de-dollarization trends and a strong price forecast from Metals Focus, which projects a 35% price increase in 2025.
• Key factors to monitor include official sector purchase reports, developments in U.S. economic policy that could affect dollar sentiment, and evolving geopolitical landscapes, as these directly influence gold's safe-haven appeal.
• Be aware that significantly reduced jewellery fabrication, down a projected 16% in 2025 due to high prices, and a widening market surplus, forecast at 840 tons, could introduce price volatility or cap upside if investment demand, including ETPs, underperforms expectations.