(Kitco News) - Gold’s record-breaking run in 2025 was not a speculative event. According to the World Gold Council, it was a year that “anchored the case for gold” across central banks, investors, and consumers alike — a structural reset that continues to reverberate through markets in early 2026.
The WGC publishes its fourth-quarter and year-end Gold Demand Trends report on Thursday. According to the data, global demand for physical gold surpassed 5,000 tonnes for the first time on record last year, with the precious metal setting 53 new all-time highs. Robust demand drove the annual average price to $3,431 an ounce, up 44% year over year.
“If you didn’t understand gold before, 2025 explained it to you,” said Joseph Cavatoni, senior market strategist at the World Gold Council, in an interview with Kitco News.
Cavatoni stressed that focusing on price alone misses the more important shift now underway. He said the most meaningful change he is seeing among institutional investors is not fear of missing out, but a reassessment of gold’s role within portfolios.
“For years the question was, ‘Did I miss the trade?’” he said. “That’s no longer the right question. The right question is: what role does gold play in my portfolio now?”
That reframing is showing up clearly in the data. Investment demand surged 84% in 2025 to a record 2,175 tonnes, driven primarily by inflows into gold-backed exchange-traded funds of 801 tonnes — the second-strongest year on record — alongside a 12-year high in bar and coin demand.
Unlike momentum traders, ETF allocators are making strategic decisions based on diversification, correlation, and long-term portfolio resilience.
“ETF providers don’t buy bounces,” Cavatoni said. “They ask whether the asset works in the portfolio, whether it’s near fair value, and whether they should be overweight or underweight right now.”
That dynamic helps explain why strong flows have persisted even after gold’s sharp early-2026 rally. Even the ebbs and flows of investment tied to global geopolitical uncertainty are changing. Cavatoni noted that gold remains at record highs even as President Donald Trump has eased his rhetoric around annexing Greenland.
“Threats around Greenland came and went, and what did we lose? Nothing,” he said.
The report also highlighted an East-West divergence, with Western investors jumping into gold-backed ETFs, while Asian investors — led by Chinese consumers — focused on buying the physical metal.
The report said annual bar and coin investment in China surpassed the previous record set in 2013 and, for the first time, exceeded jewellery consumption.
Central banks step back — but stay anchored
While central bank purchases eased from the extraordinary pace set over the past three years, demand remained historically elevated at 863 tonnes in 2025, well above the long-term average.
Cavatoni described the slowdown not as capitulation, but as a natural consequence of higher prices and broader participation.
“We expected it to slow,” he said. “What surprised us is that it didn’t slow more.”
Crucially, Cavatoni emphasized that central banks think in dollars, not tonnes. With gold prices rising sharply, many institutions are effectively meeting allocation targets through price appreciation alone, reducing the urgency to add volume while maintaining long-term strategic intent.
In his view, the structural drivers behind official-sector demand — sovereign debt sustainability, geopolitical fragmentation, and declining confidence in traditional reserve assets — remain firmly in place.
Jewellery weakness, investment strength — a telling shift
One of the clearest signals that gold’s demand base is evolving came from the jewellery market. Volumes fell 18% globally in 2025 as higher prices constrained affordability, but spending hit a record $172 billion, underscoring resilient consumer conviction.
More importantly, Cavatoni noted that in key markets like China and India, consumers are increasingly shifting from jewellery to pure investment products — bars, coins, and ETFs — reinforcing gold’s monetary and wealth-preservation role rather than undermining it.
“The money is still being spent,” he said. “That tells you something important about confidence in gold.”
2025 changed the conversation in the gold market
Cavatoni argued that 2025 marked the moment when traditional gold valuation models — heavily dependent on real yields or short-term correlations — began to break down.
“This isn’t about an old model anymore,” he said. “It’s not just about the dollar, or Treasuries, or TIPS. Those frameworks need to be rethought because we’re in a different world.”
That world is defined by persistent geopolitical risk, structurally higher debt levels, and bonds that no longer provide reliable diversification. In that environment, gold’s appeal as a portfolio stabilizer — rather than a tactical trade — has become increasingly clear.
As Cavatoni put it, gold’s performance in 2025 did not mark an endpoint, but a validation.
“It anchored the case,” he said. “And once something is anchored, the discussion changes.”
While gold prices have pushed solidly above $5,500 an ounce, the WGC expects the uptrend to remain firmly in place through the rest of 2026.
“Geopolitics will be key to investment in 2026, raising risk premia across the board,” the analysts said in the report.
“In an increasingly polarised world, there is little reason to expect this to compress. Alongside a broad set of drivers as per our 2026 outlook, gold’s appeal as an all-weather hedge relative to fixed income should continue to attract material investor demand into 2026, and possibly beyond.”
