The gold market is witnessing a shift in investor behavior, with a slowdown in central bank buying and a notable rise in demand for gold-backed exchange-traded funds (ETFs) and gold-backed cryptocurrencies. Recently, the minting volume of gold-backed tokens reached its highest level in three years, signaling growing interest in digital gold assets.
rwa.xyz data shows that over $80 million worth of gold-backed tokens were minted in the last month, propelling the sector’s market capitalization up by 6%, now totaling $1.43 billion. Alongside this, monthly transaction volumes surged by 77%, reaching $1.27 billion, highlighting a significant uptick in the digital gold market.
This surge in tokenized gold aligns with broader trends in the physical gold market. According to the latest report from the World Gold Council, total gold demand for Q1 2025 hit 1,206 tonnes, marking a 1% year-over-year increase and the strongest first quarter since 2016. However, central bank purchases slowed to 244 tonnes, a decrease from the 365 tonnes acquired in the fourth quarter of 2024.
The shift in gold demand is largely driven by gold-backed ETFs, which have seen investment demand soar to 552 tonnes, more than doubling compared to previous periods. This shift toward gold-backed ETFs and digital assets reflects how investors are increasingly turning to gold as a stable investment, especially in light of reduced central bank buying.
As a result, the average gold price for Q1 2025 reached a record $2,860 per ounce, marking a 38% rise from the previous year. Despite the strong performance, gold prices recently experienced a slight 2.35% decline, though they remain up 23.5% year-to-date, with spot gold trading at $3,240.
Traditional gold demand, particularly for jewelry, has dropped to levels not seen since the pandemic. However, demand for gold bars and coins remains robust, especially in China, where investors continue to use gold as a safeguard against economic instability.
