Record central-bank purchases, AI-driven tech demand, and a surge in investor safe-haven buying are filling the gap left by a 23% jewelry slump, even as gold prices correct 16% from highs.
The gold market is quietly rewriting its demand playbook. While the metal’s spot price has suffered a sharp correction in recent weeks, the composition of who is buying—and why—has shifted more dramatically than the headline numbers suggest. Record central-bank purchases, a surge in investor appetite and an emerging technological pillar from artificial intelligence are now filling the gap left by a collapsing jewelry sector, even as new headwinds from India’s trade policy and US interest-rate expectations test the metal’s short-term resilience.
Global gold demand including over-the-counter transactions reached 1,231 tonnes in the first quarter of 2026, according to the World Gold Council. In value terms, the market hit roughly $193 billion—an all-time high. The average gold price of $4,873 per ounce during the period explains the jump in dollar terms, though physical volumes rose only modestly.
The structural transformation is most visible in the technology sector. Demand for gold in electronics and industrial applications climbed one percent to 82 tonnes, driven by AI-related infrastructure, memory chips and semiconductors. AI servers require high-performance components where gold’s conductivity, durability and thermal management are irreplaceable. Consumer electronics makers, by contrast, continue to reduce or substitute gold in their products—a divergence that means the industrial market now runs at two speeds.
Central banks remain the bedrock of institutional demand. They added a net 244 tonnes to their reserves in the first quarter, spending $37 billion—a record quarterly outlay. Poland’s National Bank was the most aggressive buyer, increasing holdings by 31 tonnes to 582 tonnes. China’s central bank added a further seven tonnes, bringing its total to 2,313 tonnes. The geopolitical motivations are clear: since the freezing of Russian central-bank assets in 2022, many countries have accelerated their shift to gold as a reserve asset beyond the reach of foreign jurisdictions.
Should investors sell immediately? Or is it worth buying Gold?
The flip side of elevated prices is the damage to consumer demand. Jewelry purchases plunged 23 percent to 300 tonnes, with the steepest declines in China, India and the Middle East. Price sensitivity in those markets is acute, and the high level has clearly deterred discretionary buying.
Investors stepped in to absorb much of that slack. Bar and coin demand jumped 42 percent to 474 tonnes—the second-highest quarterly total on record. That surge reflects a search for safe havens amid geopolitical uncertainty, even as short-term rate expectations have turned decisively against the metal.
On the supply side, relief is limited. Global mine production reached 3,672 tonnes in 2025, up just one percent, and only moderate growth is expected this year.
Despite that robust structural backdrop, gold closed last Friday at $4,555.80 per ounce, down roughly 3.5 percent on the week and about 16 percent below its 52-week high of $5,450. On a month-over-month basis, the metal has lost 6.21 percent, though it still holds a year-to-date gain of 4.93 percent.
Two factors are driving the sell-off. First, India doubled its effective import duty on gold to 18.45 percent on May 13, a move that includes a 15 percent customs tariff plus the integrated goods-and-services tax. The policy is aimed at protecting India’s foreign-exchange reserves, which are under pressure from high energy costs tied to the near-complete blockade of the Strait of Hormuz. The Directorate General of Foreign Trade has also capped duty-free imports under the Advance Authorisation scheme at 100 kilograms per approval, up from no limit, to prevent abuse by jewelry exporters.
Gold at a turning point? This analysis reveals what investors need to know now.
Second, US inflation data has crushed hopes for an early rate cut. Wholesale prices rose at the fastest pace since 2022, while the consumer price index came in at 3.8 percent year-on-year, above expectations. According to the CME FedWatch tool, the probability of a June rate cut has fallen to near zero, and markets now price in roughly a 50 percent chance of a rate increase by December. Higher real yields and a stronger dollar are classic headwinds for non-yielding gold.
Technically, the metal is testing the 0.382 Fibonacci retracement level around $4,540. Analysts consider the bullish scenario intact as long as the zone near $4,380 holds. The key near-term catalyst will be the release of the Federal Open Market Committee’s May 20 meeting minutes, which saw four dissenting votes—a split that adds unusual weight to the record. For the longer view, JP Morgan forecasts gold at $5,055 per ounce by the fourth quarter of 2026.
The core conflict for gold is clear: short-term pressure from monetary policy and trade barriers is colliding with a fundamental broadening of the demand base. Central banks, retail investors and the AI-driven technology sector are increasingly substituting for a shrinking jewelry market. How that tension resolves will define gold’s path through the rest of the year.
Ad
Gold Stock: New Analysis – 18 May
Fresh Gold information released. What’s the impact for investors? Our latest independent report examines recent figures and market trends.
