The gold market is experiencing a notable shift, with a decline in central bank buying juxtaposed against a growing demand for exchange-traded funds (ETFs) and gold-backed cryptocurrencies. Recently, the minting of tokens backed by this precious metal reached a three-year high, presenting a new dynamic in how investors engage with gold.
Recent data from rwa.xyz reveals that over $80 million worth of gold-backed tokens were minted in just the past month. This significant activity has resulted in a 6% increase in the sector’s market cap, bringing it to $1.43 billion, while the monthly transfer volume saw an impressive 77% rise to $1.27 billion. This surge clearly indicates a renewed interest in digital representations of gold among investors.
The uptick in token activity is indicative of a broader trend taking shape within the gold market. According to the World Gold Council’s latest report, total gold demand reached 1,206 tonnes in the first quarter of this year, marking a 1% year-over-year increase—the strongest Q1 since 2016. This surge occurred despite a slowdown in central bank purchases, which dropped to 244 tonnes from 365 tonnes in the previous quarter.
Gold ETFs have been pivotal in this market transformation. The investment demand in this category more than doubled to 552 tonnes, highlighting a shift where individual investors are increasingly turning to gold—a behavior historically associated with central banks.
These inflows have propelled the average quarterly price of gold to an all-time high of $2,860 per ounce, reflecting a 38% increase from last year. However, despite this remarkable rise, the price saw a slight dip of 2.35% last week, following a year-to-date increase of 23.5%, closely mirroring the trends in other risk assets, including cryptocurrencies. Presently, spot gold is trading at $3,240.
While traditional gold demand, particularly in the jewelry sector, has faced challenges—plummeting to levels reminiscent of the pandemic era—demand for bars and coins has remained robust, especially in China.
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