#What Happened
Gold prices have been on the rise, largely due to substantial central bank buying. In June, the European Central Bank reported that central banks accounted for over 20% of global gold demand in 2024 (i.e. monetary/official sector demand, as distinct from jewellery, investment or industrial demand), a significant increase from the 10% average seen in the 2010s. However, reported data shows that central banks added 1,044.6 tonnes of gold in 2024, which is high in historical perspective despite being lower than the most extreme years.
#Why It Matters
This rise in gold demand is critical as it signals a shift in investor sentiment towards safer assets amidst geopolitical tensions. Central banks are turning to gold as a hedge against inflation and market volatility (among other motives such as reserve diversification, sanctions resilience, and currency devaluation concerns), which could indicate a broader trend in the economy. For investors, this could lead to increased volatility in other asset classes and could boost the demand for gold-related investments.
#What to Watch Next
Investors should monitor upcoming central bank meetings for insights on future gold purchases. Additionally, keep an eye on geopolitical events that might impact gold prices. Upcoming economic data on inflation could also reveal whether gold's safe-haven status will continue to attract buyers.
#Quick Take
Could be that, if current trends hold, a sustained focus on gold by central banks may prompt retail investors to consider gold investments before the next earnings season begins.