A New Era: Physical Gold Demand Surpasses Jewellery

Global gold prices are expected to continue setting new records this year. Precious metals consultant Metals Focus forecasts that the average gold price throughout 2026 could reach US$4,920 per troy ounce, a 43% surge compared to last year’s average of US$3,432 per ounce. This projection follows a 44% annual increase in 2025, marking the best performance since 1980.

According to the Gold Focus 2026 report, Metals Focus suggests that the factors driving the gold rally last year remain in effect. US policy uncertainty, concerns regarding the long-term prospects of the US dollar, high geopolitical risks, and expensive stock market valuations ensure that gold remains viewed as a safe-haven asset by global investors.

Amidst these price projections, the global gold market is undergoing a significant structural shift. For years, gold demand was primarily supported by the jewellery sector and central bank purchases. However, this landscape is changing. Metals Focus predicts that physical investment in gold bars and coins will reach 1,615 tonnes in 2026, surpassing projected jewellery demand of 1,459 tonnes. For the first time in the agency’s data, physical investment is set to become the largest demand category in the gold market.

This trend is evident from developments over the last two years. Global jewellery demand fell from 2,025 tonnes in 2024 to 1,646 tonnes in 2025 and is expected to decline further to 1,459 tonnes in 2026. As record-high prices cause consumers to reduce purchases, opt for lighter products, or switch to cheaper alternatives, physical investment has risen from 1,211 tonnes to 1,404 tonnes and is projected to reach 1,615 tonnes this year.

Citing Metals Focus, Reuters reports that China will be one of the primary drivers of growth in physical gold investment demand. Persistent global economic uncertainty maintains high interest among the public and investors in safe-haven assets, with capital flows continuing into gold-based instruments despite significantly higher prices compared to previous years.

Another shift is emerging among central banks, historically a pillar of the gold market. Net purchases by central banks are expected to drop from 848 tonnes in 2025 to approximately 720 tonnes in 2026. Rising energy prices due to geopolitical conflicts have forced several nations to be more active in maintaining exchange rate stability. In such conditions, liquid foreign exchange reserves become increasingly vital, leading some central banks to reduce gold accumulation or utilise existing reserves.

In April 2026, Poland added 14 tonnes of gold to its reserves, while China purchased 8.1 tonnes and the Czech Republic added 2.5 tonnes. Kazakhstan and Bolivia also recorded purchases. Conversely, Russia reduced its gold reserves by 6.2 tonnes, and Uzbekistan released approximately 1.2 tonnes. Turkey presented an interesting case, with gold reserves increasing by 38.6 tonnes in April, though much of this was related to adjustments in gross gold reserves used to support banking system liquidity.

These developments indicate that the wave of central bank gold purchases that dominated the market since 2022 is entering a new phase. While purchasing activity continues, it is becoming more concentrated in specific nations. Some countries are strengthening reserves as part of a foreign exchange diversification strategy, while others are using existing reserves for currency management and domestic financial market stability.

The United States remains the world’s largest holder of gold reserves with 8,133.5 tonnes as of March 2026, followed by Germany with 3,350.3 tonnes, the IMF, Italy, and France. China now holds the sixth position globally with 2,321.5 tonnes, slightly ahead of Russia’s 2,298.5 tonnes. In Asia, India ranks ninth with 880.5 tonnes, while Japan holds 846 tonnes.

Globally, total official gold reserves reached 36,558.5 tonnes in March 2026, equivalent to 27.7% of total global foreign exchange reserves. In the Eurozone, gold ownership reaches as high as 72.9% of total foreign exchange reserves. These figures demonstrate that gold maintains a vital role in the international monetary system despite the evolution of modern financial instruments.

Gold supply also continues to rise. Mine production is expected to reach 3,907 tonnes in 2026, up from 3,817 tonnes the previous year. Gold recycling is projected to increase to 1,476 tonnes. Overall, total global gold supply is projected to reach 5,383 tonnes this year, while total demand is expected to decrease to 4,177 tonnes from 4,275 tonnes in 2025.