While gold performed quite well in the current market environment, many investors wonder why gold failed to benefit from rising demand for safe-haven assets, which could have pushed its price to new highs. Let’s take a look at why it happened and what’s next for gold markets.
The recent data from the World Gold Council shows that central banks continued to buy gold at a robust pace at the start of this year. Uzbekistan, China, and Kazakhstan were the top three buyers among central banks. Poland and India have also continued to increase their gold holdings in January 2025. Overall, central banks have been net buyers of gold for many months in a row.
Meanwhile, the inflows into gold ETFs have also continued at a healthy pace. In February 2025, gold ETFs enjoyed the strongest inflows since March 2022. North America was the key driver for rising inflows as traders were concerned about potential tariffs on the UK, which is the global leader in gold trading.
Nevertheless, the price of gold did not test new highs despite strong purchases from central banks and rising inflows into gold ETFs. Here’s why.
The gold market found itself under pressure amid sell-off in global markets, which was triggered by concerns about trade wars. At such times, investors are often forced to raise liquidity and start taking money out of their profitable positions, including those who are attractive in the long-term.
That’s why the so-called «safe-haven assets» such as gold often move lower during sell-offs in global markets, while many traders expect them to gain ground amid rising demand for safe-havens.
It should be noted that the minor pullback in gold markets was quickly bought, which indicated that demand for gold remained strong. Such stability is not surprising as central banks are the key buyers in gold markets right now.
From a big picture point of view, central banks continue to diversify their holdings in order to reduce the share of government bonds in their reserves. The heavy use of sanctions and loose monetary policy in developed countries forced the central banks to increase the share of gold in their holdings. We at Bitbanker also believe that asset diversification is important and present our clients with an opportunity to invest in gold that is stored in the UAE.
In case global central banks continue to buy gold at current rates, gold will have a solid chance to test new highs in the near term. At this point, gold markets feel some pressure from forced selling by investors who must raise liquidity. When global markets calm down, gold will be ready for the next leg up, which could take it above the $3000 level and attract speculative traders.
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