Gold Demand Amid Price Rally: A Global Perspective

As gold prices rally to near-record highs, the demand landscape for the precious metal is experiencing significant shifts across global markets. With central banks adjusting their holdings and retail consumers grappling with soaring prices, the dynamics of gold demand are more complex than ever. Amid these developments, institutions like Goldman Sachs and Bank of America have raised their gold price forecasts, pointing to long-term bullish trends driven by macroeconomic and geopolitical factors.

Central Banks Continue to Accumulate Gold
Central banks remain key players in the gold market, albeit with varied strategies. In August, global central banks reported net purchases of 8 tonnes of gold, marking the lowest buying activity since March. The National Bank of Poland led the acquisitions, followed by the Central Bank of Turkey and the Reserve Bank of India. However, there were some reductions as well, with the Central Bank of Kazakhstan reducing its holdings by 5 tonnes. This activity underscores the strategic importance of gold for national reserves, particularly amid ongoing geopolitical tensions and economic uncertainty.

Bullish Forecasts: Goldman Sachs and Bank of America
The rally in gold prices has led to upward revisions in price targets by leading financial institutions. Goldman Sachs recently raised its gold price target to $2,900 per ounce for early 2025, up from an earlier forecast of $2,700. The bank cites several reasons for this bullish stance, including expectations of lower global interest rates, rising central bank demand, and gold’s well-established role as a hedge against geopolitical, financial, and recessionary risks. They project an average gold price of $2,973 per ounce throughout 2025.

Similarly, Bank of America has adjusted its 2025 forecast from $2,365 to $2,406 per ounce, maintaining its long-term forecast of $2,750. These upward revisions reflect a growing consensus among analysts that gold will continue to serve as a safe haven amid persistent economic uncertainties and shifting monetary policies.

Physical Gold Demand Declines as Prices Surge
Despite these optimistic price projections, physical demand for gold has softened in key markets due to the high price levels. India, the world's second-largest gold consumer, saw a brief spike in demand after cutting import duties in July. However, local gold prices quickly surged to all-time highs, causing a sharp drop in retail demand. According to Prithviraj Kothari, president of the India Bullion and Jewellers Association (IBJA), many consumers are now finding it difficult to manage the rising costs, leading to a significant slowdown in purchases.

In Europe, physical gold demand has also been hit, especially in Germany and Austria, traditionally strong markets for gold investment. High interest rates have driven many investors toward yield-bearing assets, reducing demand for newly minted bars and coins by up to 80%, according to Wolfgang Wrzesniok-Rossbach of Fragold GmbH. The shortfall is being offset by secondary material coming from buybacks, reflecting a shift in investor behavior.

Why Gold Bullion Coins Are a Smart Choice
While demand for physical gold may be waning in some regions, it is essential not to overlook the long-term value of holding gold bullion coins. These coins provide a tangible and enduring store of value, especially in times of market volatility. As central banks continue to diversify their reserves with gold, individual investors can benefit from following a similar strategy.