Gold staged an impressive rally this year, driven mainly by a resurgence in exchange-traded fund (ETF) demand alongside steady central bank buying. As Deutsche Bank puts it, the two have emerged as “aggressor” buyers in the market, shaping price momentum beyond traditional drivers.
ETF inflows have made this year one of the three strongest for accumulation since the products were launched. Assets under management (AUM) are now 70% above 2020 levels in U.S. dollar terms, and their impact on prices is more pronounced than in past cycles.
According to Deutsche analyst Michael Hsueh, ETF demand is exerting “a 50% stronger influence on gold prices” this year compared to when investors were reducing holdings between 2021 and 2024.
Central banks, meanwhile, continue to add 400–500 tonnes of gold annually, a trend the bank describes as largely price-insensitive. This official demand has seen a step higher since 2021, even at elevated real prices.
The combination of price-indifferent central bank purchases and renewed ETF inflows helps explain why gold has outperformed model-based expectations.
By contrast, jewellery demand retains its historical price elasticity and tends to contract when prices rise.
Hsueh notes that increases in jewellery consumption are more likely to occur when gold is cheaper, meaning that declines in this segment are not necessarily bearish for the market. Bar and coin demand is also generally price-insensitive, though outlier years can show fluctuations.
On the supply side, recycled gold typically acts as a brake on price moves, with higher prices encouraging more scrap supply. However, in 2025, recycled flows have undershot expectations.
First-half annualised recycled supply of 1,392 tonnes was below the regression trendline, indicating a weaker restraining effect on gold’s climb .
Statistical testing complicates the picture. Deutsche Bank’s Granger causality analysis found that “gold price changes cause ETF flows rather than vice versa.”
Extended to broader financial conditions, the results showed Treasury yields, rather than the U.S. dollar, as the key variable influencing gold.
“Rather oddly, the test also indicates that the U.S. dollar and gold prices both Granger-cause changes in Treasury yields,” Hsueh added.
The analyst cautions that heavy reliance on ETF flows introduces downside risks should these inflows stall or reverse.
Historically, investors have added gold when yields were falling, making the Federal Reserve’s policy pivotal for the outlook.
Source :
https://www.investing.com/news/commodities-news/whos-driving-the-gold-market-in-2025--investors-or-central-banks-4261292
