Sustained Increase in Gold Prices – Anticipated Further Price Elevation Ahead
In the world of gold, a fascinating shift is taking place. Central banks, long-time enthusiasts of the precious metal, are moderating their buying pace, while investment demand and the gold reserves of certain countries continue to grow.
The Bundesbank, Germany's central bank, has not made any new gold purchases but has slightly reduced its reserve. This decision comes as central banks worldwide, including those in China and Poland, have been increasing their gold reserves. In fact, China has nearly sextupled its official gold reserves since the turn of the century.
Central banks' gold purchases surged dramatically from under 1,000 tonnes annually before 2022 to a peak of 1,180 tonnes in 2024. However, this trend is now cooling, with a decline in quarterly buy volumes and forecasts suggesting total yearly purchases could fall below 1,000 tonnes. Despite this slowdown, 95% of central banks still expect their gold reserves to increase over the next 12 months.
This cooling in official purchases is largely due to the sharp rise in the gold price. The price of a kilogram of gold has risen from around 80,700 euros to around 92,600 euros, and the price per troy ounce is currently around $3,300. This rise has led to concerns about potential price corrections, which are dampening immediate purchasing appetite.
Meanwhile, global demand for gold overall rose by 3% year-on-year in Q2 2025, fueled mainly by a 78% surge in investment demand. However, jewelry demand fell sharply by 14%—its lowest level since the COVID-19 pandemic period in 2020. The jewelry sector continues to face headwinds from high gold prices, reducing consumption volume despite higher overall gold demand driven by investment and reserve accumulation.
One country bucking this trend is Germany, where the gold jewelry market is thriving despite rising prices and demographic changes. The German gold jewelry market saw record figures for 2023 and 2024, defying expectations.
The World Gold Council predicts a further price increase in the second half of the year, albeit at a slower pace. However, the high price of gold has led to some interesting developments. For instance, China is likely to have acquired at least another 500 tons of gold through secondary markets, and central banks in China and other countries are increasing their gold reserves to reduce dependence on the dollar.
In conclusion, central banks remain committed to increasing gold reserves long-term but are temporarily moderating their buying pace. This cooling in official purchases, combined with a decline in jewelry demand due to higher prices, is reshaping the global gold market dynamics. Investment demand and central bank reserves are the primary growth drivers, while jewelry consumption declines. As for the Bundesbank, it continues to view the New York Fed as an important storage location for its gold due to security and tradability. For gold owners, this is good news, as the price continues to rise. But for potential gold buyers, the increasing price means they will have to pay more.
Central banks are temporarily moderating their gold purchasing pace, despite the forecasted decline, 95% of these institutions still expect their gold reserves to increase over the next 12 months. The World Gold Council's prediction of a further price increase in the second half of the year, albeit at a slower pace, is influencing the buying behavior of potential investors.
