Poland Leads Buying, China Continues Accumulation
The National Bank of Poland emerged as the largest reported buyer during Q2, adding 51 tonnes and taking its gold reserves to 632 tonnes by end-June. Its H1 purchases totalled 82 tonnes. The People's Bank of China added 33 tonnes during the quarter, its largest quarterly increase since Q4 2023, with continued purchases suggesting gold remains an important component of China's longer-term reserve strategy.
Buying was not limited to these two countries. Uzbekistan, Kazakhstan, Jordan and the Czech Republic were among the other notable purchasers, while smaller additions across several other markets highlighted the geographical breadth of official-sector demand. Selling moderated significantly in Q2. Turkey, which had been a major seller in Q1, sold only a small amount during the quarter. Russia was the largest reported seller.
Why Central Banks Are Still Buying Gold
Central banks typically manage reserves with objectives very different from those of short-term investors. Gold plays several roles in official reserves: it provides diversification from currencies and government securities, carries no direct sovereign credit risk, has historically served as a store of value during periods of financial or geopolitical stress, and helps diversify reserves when uncertainty around currencies, inflation or global markets rises.
The World Gold Council's latest central bank survey reinforces this longer-term trend. About 89% of respondents expect global central bank gold reserves to increase over the next year, while a record 45% expect their institutions to increase holdings. Country-specific liquidity requirements, currency management and changes in the gold price can influence the timing of purchases, but the strategic case for gold appears to remain firmly in place.
Jewellery Weakens as Investment Demand Takes a Bigger Role
The strength in central bank demand came as some traditional sources weakened. Global jewellery consumption fell to 278 tonnes in Q2, down 17% YoY, as elevated gold prices reduced affordability. Yet the value of jewellery purchases remained comparatively resilient, showing that consumers continued to spend on gold even as they bought less metal by weight.
Gold-backed ETFs recorded moderate outflows during Q2 as rising real yields, shifting interest-rate expectations and a stronger US dollar reduced investor appetite in some Western markets. Physical investment held up better, with global bar and coin demand at around 307 tonnes, broadly in line with year-ago levels. The changing mix suggests that investment and institutional flows are increasingly influencing gold demand, rather than jewellery consumption alone.
India Shows Strong Investment Appetite Despite High Prices
India reflected this shift during the quarter. Jewellery demand fell as higher prices made heavier and higher-carat pieces less affordable. Investment demand, however, was considerably more resilient. Gold bar and coin sales in India rose 9% YoY in Q2, and H1 demand touched its highest point since 2013. Buying on price corrections pointed to gold's continued status as an investment metal rather than a purely consumption-driven commodity.
What This Means for Gold Investors?
Gold is trading near ₹1,55,000 per 10 grams in domestic markets, having recovered about 12% from recent lows. This recovery has come despite weaker jewellery demand and global ETF outflows, with central bank purchases, OTC activity and physical investment remaining supportive.
Investors seeking exposure have several options. Gold ETFs offer liquidity and transparent market-linked exposure, while gold funds of funds allow investors to participate systematically through SIPs. Sovereign Gold Bonds, already held or available in the secondary market, provide gold-price exposure along with applicable interest and tax characteristics. Physical gold remains relevant for jewellery and gifting, but making charges and storage costs reduce its efficiency as a pure investment vehicle.
The risks are clear. Higher real interest rates, a stronger US dollar or tighter-than-expected monetary policy can put pressure on prices. Q2 ETF outflows of 44.8 tonnes show that financial investors remain sensitive to interest-rate and currency movements. That said, gold's underlying demand base remains strong, increasingly led by central banks and investment demand rather than jewellery alone — supporting its role as a portfolio diversifier and long-term strategic allocation during periods of heightened economic and geopolitical uncertainty.
