Asian Investors Drive Surge in Demand for Physical Gold Bars and Coins

Demand for physical gold surged in the first quarter. But not in the United States.

Asian investors primarily drove demand for gold bars and coins as American investors continued to sit on the sidelines, data from the World Gold Council showed on Thursday.

Global demand for gold bars and coins rose by a healthy 3 percent in the first quarter, increasing to 317.3 tonnes in Q1 from 325.4 tonnes. That was comparable to fourth quarter demand and a 20.3 percent increase from the third quarter of 2024.

First quarter demand for gold coins and bars was also 15 percent above the five-year average.

At 19.3 tonnes, U.S. gold coin and bar demand dropped to the lowest level in almost five years.

While Asians bought gold, Americans sold, seeking profits with prices at record levels.

The decline was relatively minor, with demand decreasing by 22 percent year-on-year and 16 percent from Q4.

World Gold Council analysts said the drop wasn’t surprising given Trump’s transition into the White House.

"Historically, Republican presidencies have generally resulted in lower retail demand; however, fieldwork suggests that investment interest picked up late in the quarter and continued through early Q2 as tariff announcements dominated headlines."

To be clear, American investors didn’t spurn gold completely. Gold flowed into North American-based ETFs, with fund holdings increasing by 134 tonnes.

Some of that ETF demand likely came from Canadians who, as already noted, flocked to the yellow metal in Q1.

ETFs are a convenient way for investors to play the gold market, but owning ETF shares is not the same as holding physical gold.

ETFs are relatively liquid. You can buy or sell an ETF with a couple of mouse clicks. You don’t have to worry about transporting or storing metal. In a nutshell, it allows investors to play the gold market without buying full ounces of metal at the spot price.

Since you are just buying a number in a computer, you can easily trade your ETF shares for another stock or cash whenever you want, even multiple times on the same day. Many speculative investors take advantage of this liquidity.

But while a gold ETF is a convenient way to play the price of gold on the market, you don’t possess any gold. You have paper. And you don’t know for sure that the fund has all the gold either, especially when the fund sees inflows. In such a scenario, there have been difficulties or delays in obtaining physical metal.

It’s significant that this gold bull rally has primarily occurred with U.S. investors on the sidelines. It will be interesting to see what happens when they finally jump on the bandwagon.