Gold market shifts as central bank buying slows and demand from ETFs and gold-backed cryptocurrencies grows

The gold market is seeing a shift in activity, with central bank buying slowing and demand from exchange-traded funds and gold-backed cryptocurrencies growing.

The gold market is shifting as central bank buying slows and demand from exchange-traded funds and gold-backed cryptocurrencies increases. The latter recently reached a three-year high, measured by the net minting volume for tokens backed by the precious metal.

Over $80 million worth of these tokens were minted over the past month, according to data from rwa.xyz. This boost helped push the sector's market cap up 6% to $1.43 billion. Meanwhile, monthly transfer volume soared 77% to $1.27 billion, indicating a strong recovery in interest in digital representations of the precious metal.

This surge in token activity aligns with a broader trend in the gold market.

The World Gold Council's latest report reveals that total gold demand in the first quarter of the year reached 1,206 tonnes, showing a 1% year-over-year increase and the strongest first quarter since 2016. This rise occurred despite a decrease in central bank purchases, which fell to 244 tonnes compared to 365 tonnes in the fourth quarter.

Gold ETFs played a significant role in this shift. Investment demand has more than doubled to 552 tonnes, which may indicate investors shifting into the precious metal, a move typically associated with central banks.

These inflows contributed to an average quarterly price of $2,860 per ounce for gold, marking a 38% increase from the previous year. However, the price decreased by 2.35% last week as risk assets, including cryptocurrencies, continued to rise. Currently, spot gold is trading at $3,240.

While traditional gold demand, such as jewelry, decreased to pandemic-era lows, bar and coin demand remained high, particularly in China.