Over the last five years, the balance between consumer and investment demand for gold has changed significantly, and that change goes a long way to explaining why prices have remained elevated.
In 2021, jewellery consumption remained the dominant source of demand, at approximately 2,124 tonnes (“tn”) compared with investment demand of around 1,007tn and central-bank purchases of 463tn. However, central-bank buying has since increased substantially, exceeding 1,000 tonnes annually between 2022 and 2024, with investor demand becoming an increasingly important influence on the market.
This shift was particularly evident in 2025, when global investment demand rose to approximately 2,175 tonnes, overtaking jewellery consumption, which fell to around 1,542 tonnes. Although central-bank purchases moderated to 863 tonnes, they remained well above the previous averages recorded in the decade before 2022. For the first time in several years, investment demand substantially exceeded jewellery consumption.
What is behind the shift?
Gold’s changing demand profile reflects not only market dynamics but also wider geopolitical developments.
A global financial system has long been a driver of economic growth, but with growing geopolitical tensions, competing national interests and the increasing use of financial infrastructure as a tool of foreign policy, access to global markets and financial systems might not remain largely unrestricted.
Measures introduced by Western governments, restricting access to certain financial institutions, markets and payment systems, have accelerated the shift. The increased central bank purchases since 2022, coincides with the freezing of foreign currency reserves, which brought back attention to the risks associated with holding assets in foreign jurisdictions. This has encouraged investors to seek assets that can provide that diversification beyond traditional financial markets. As a result, decisions are being made beyond return-maximizing, to also consider financial sovereignty and security of access.
The role of gold
Gold has no issuer or counterparty; gold held outside the international financial system, can be insulated from payment restrictions or foreign asset freezes, depending on where it is being held. This has made the metal an increasingly important asset in reserve diversification strategies.
Uncertainty surrounding government debt, currency stability and geopolitical developments has encouraged investors to seek assets that can provide diversification beyond traditional financial markets. Gold’s current performance is even more noteworthy, as it has remained strong even during periods of elevated interest rates, which would usually result in downward pressure on prices.
Central banks have become increasingly important participants in the gold market: central banks purchased 321 tonnes in the third quarter of 2026, taking year-to-date purchases to 675 tonnes. Additional investments through gold-backed funds has also played a significant role. As these funds provide investors with exposure to gold without requiring them to buy and store it directly. In 2025, global gold ETFs recorded inflows of approximately 801 tonnes, their second-strongest year on record. In the third quarter of 2026, they attracted a further 211 tonnes, reversing the outflows recorded in the previous quarter.
Although investment demand is not exclusively institutional the price is still largely being supported by buyers whose motivations extend beyond immediate physical consumption.
India’s changing gold demand
The changing composition of gold demand is particularly evident in India, the world’s biggest gold consumer after China. Recent figures suggest that the surge in gold prices is beginning to have a measurable effect on one of the industry’s most important sources of traditional demand.
Indian gold demand was forecast to fall to approximately 650 tonnes in 2026, its lowest annual level since 2020. In Q3, demand by weight fell 29% year-on-year to 162.5 tonnes, with jewellery purchases declining by 20% and investment demand by 40%.
Although demand by weight fell, jewellery spending alone actually rose 16% in the country year-on-year. This tells us that consumers were spending more overall, but purchasing less gold by weight, showing how high prices are sustaining market value, even as they constrain physical consumption.
The contrast between the global market is revealing. Investment demand reached 479tn and central bank purchases totalled 321tn: the market is not seeing a decline in demand for gold, but different buyers, responding to high prices differently.
So, what is sustaining the price?
The distinction between these buyers helps explain why weaker consumer demand has not necessarily translated into a decline of the gold price.
For jewellery consumers, price is a direct constraint. For central banks and institutional investors, the purchase and storing of gold is a means of diversifying reserves as well as reducing reliance on other currencies and financial assets. Central banks have accumulated an average of 1,000t of gold over the past four years and at its peak it represented a substantial share of global mine supply.
Alongside central bank activity, investment demand has also provided significant support to the gold price, for example, as we see with physically backed gold ETFs. Gold ETFs have attracted new investor interest as they are a form of gaining exposure to gold without purchasing and storing the metal themselves.
What’s next for the gold market?
For producers, a higher price means deposits can become more commercially viable, raise investor interest and improve operating margins. However, higher prices do not necessarily translate into additional production. Mining a gold deposit, from discovery to production takes between 10 and 20 years, with less than 0.5% of prospected sites developing into producing assets. Factors such as increased difficulty for investment capital, extended exploration, heavily bureaucratic and long permitting and financing processes, all contribute to the longer development timelines.
This creates a need for caution in the market. While demand can shift relatively quickly, responding to a changing market and ensuring supply of newly mined gold is cannot be done as quickly. The ability to maintain existing production, advance economically viable projects and replace depleted reserves, will become an increasingly important, in a market where gold plays a central part in reserve diversification and portfolio protection.