Contents
- UBS Raises 2025 Demand Outlook as Investment Appetite Surges
- Investment Demand Offsets Central Bank Slowdown
- Central Bank Buying Slows, But Remains Structurally Strong
- Jewelry Demand Contracts Sharply
- Supply Growth Muted, With Hoarding Curbing Recycling
- Gold Holds Ground Despite Risk-On Conditions
- Bottom Line: Risk-Driven Demand Justifies Higher Forecast
- Special Note: How to interpret this significant change
UBS Raises 2025 Demand Outlook as Investment Appetite Surges
UBS has raised its 2025 full-year gold demand forecast following stronger-than-anticipated buying trends, particularly within the investment segment. The move comes despite record-high gold prices and a temporary slowdown in central bank accumulation.
The bank now expects total gold demand to reach 4,760 metric tons for the year, a 3% increase year-over-year and the highest level since 2011 excluding over-the-counter (OTC) activity. The full analysis is presented in the note authored by Wayne Gordon, Giovanni Staunovo, and Dominic Schnider, published by UBS Global Wealth Management on August 7, 2025.
Investment Demand Offsets Central Bank Slowdown
The World Gold CouncilÔÇÖs second-quarter report, released July 31, showed overall gold demand rising 3% year-over-year to 1,249 metric tons, in spite of all-time high prices. The principal contributor was investment demand, up 78% year-over-year, driven by exchange-traded fund (ETF) inflows at their fastest half-year pace since 2010. Physical bar and coin demand rose 11%, with ChinaÔÇÖs buying activity standing out at +44% year-over-year.
ÔÇ£ETF demand is now expected to exceed 600 metric tons for 2025, revised upward from 450 metric tons,ÔÇØ according to UBS, making it the strongest year since 2020 for institutional inflows.
Despite record prices, investor appetite has remained firm. UBS notes that while speculative positioning remains below previous highs, the rising allocation to ETFs and the resilience of physical demand reflect persistent macro concerns. Geopolitical instability, fear of sanctions, doubts surrounding Federal Reserve independence, and ongoing de-dollarization trends are cited as underlying drivers supporting gold at current levels.
Central Bank Buying Slows, But Remains Structurally Strong
Central bank purchases showed a modest deceleration but remain elevated above their 2010ÔÇô2021 trend. Notably, 54% of global central bank buying in Q2 was unreported to the IMF. Poland emerged as a consistent buyer, while China’s reported six-ton acquisition fell short of unofficial estimates. However, survey results suggest continued strength: 43% of central banks plan to increase gold holdings over the next year, a notable rise from 29% in 2024.
ÔÇ£Almost all respondentsÔÇö69 of 73 central banksÔÇöexpect to increase or maintain their gold reserves,ÔÇØ UBS reported, underscoring persistent institutional demand despite short-term pacing shifts.
In light of recent data, UBS has revised its full-year central bank purchase estimate slightly downward to 900ÔÇô950 metric tons from a prior range of 950ÔÇô1,000 metric tons. This maintains a historically elevated trend, albeit reflecting the slower reported accumulation in Q2.
Jewelry Demand Contracts Sharply
Jewelry consumption declined 14% year-over-year, nearing levels last seen during pandemic lockdowns. Elevated prices drove a shift to lighter, lower-carat, or substitute materials such as platinum. Despite this decline, the overall demand outlook remains positive given the outsized contribution of investment demand.
Supply Growth Muted, With Hoarding Curbing Recycling
On the supply side, global mine production and recycling rose 1% and 4% year-over-year respectively in Q2. UBS attributes subdued recycling activity to strong collateralization of jewelry, persistent hoarding, and limited forced selling. While mine output is expected to reach record levels in the second half of the year, UBS emphasizes that historical patterns show supply changes have minimal short-term impact on pricing direction.
Gold Holds Ground Despite Risk-On Conditions
UBS notes that goldÔÇÖs price action has remained resilient despite improving sentiment across broader risk assets, a rebounding dollar, and deferred rate-cut expectations. The metal recovered strongly following weaker-than-expected U.S. payroll data in July and an escalation in trade tensions, particularly involving new tariffs on India, Switzerland, and public remarks targeting Federal Reserve leadership.
GoldÔÇÖs negative correlation with the U.S. dollar has reasserted itself, enhancing its appeal as a hedge. UBS reiterates its allocation recommendation of approximately 5% for investors with a predisposition toward gold, maintaining its baseline price target of $3,500 per ounce. In a downside macro scenario, the upside case extends to $3,800 per ounce.
Bottom Line: Risk-Driven Demand Justifies Higher Forecast
UBSÔÇÖs updated outlook emphasizes the shift in gold market drivers. Central bank flows remain elevated but less dominant. In their place, investment demandÔÇöespecially ETF flowsÔÇöhas assumed a leading role in price support. The report frames gold not as a reactionary hedge, but as a structurally relevant asset amid a shifting macro-financial order.
ÔÇ£Gold remains a vital component of a diversified portfolio,ÔÇØ UBS concludes, recommending continued positioning for upside in a landscape defined by policy uncertainty, inflation volatility, and geopolitical risk.
Special Note:
If CB buying is slowing and investment demand is growing, the marketÔÇÖs dynamics will change somewhat. We have been saying at GoldFix for the past 3 years that the CB buying has ÔÇ£raised the floorÔÇØ on Gold being careful to note CB buying is patient but relentless, minimizing price spikes.
Now that the CB buying is less aggressive and investment demand is driving gold at the margins, this flips the metric.
The floor is lowered potentially, and the roof is raised. The floor aspect is a function of CB buying being more selective on the one hand and Investment buying being more fickle on the other hand. As to the roof being raised: investors are less price sensitive, less patient, and more apt to chase price.
Overall, dips may get bigger especially if weÔÇÖre correct about producer activity picking up. But highs should get (much) higher. Get ready for more volatility in both directions with an upward bias unless some massive geopolitical change breaks towards global reconciliation. Otherwise, we’d advise to not let volatility scare you either way.
About the Author
Vincent Lanci is a commodity trader, Professor of MBA Finance (adj.) , and publisher of the GoldFix newsletter.
