Gold’s Record Physical Buying Spree Collides With a Market Frozen by Sticky Inflation

Private investors bought gold at record pace in Q1 while jewelry demand slumped. Central banks added reserves. But rising inflation and Fed rate hike prospects keep gold stuck below $4,700.

Investors stampeded into gold bars and coins at an unprecedented pace during the first three months of the year, even as the broader market struggled to break above $4,700 an ounce. The World Gold Council reported global demand of 1,231 tonnes for the quarter, representing a record $193 billion in value. That headline number, however, masks a stark divergence beneath the surface: private investors piled into physical bullion while jewelry buyers retreated sharply.

Bar and coin purchases surged 42% to 474 tonnes, the strongest quarterly showing in years. By contrast, jewelry demand collapsed 23% as consumers balked at elevated prices and redirected spending toward harder assets. Gold is being treated less as an adornment and more as a strategic store of value in an environment where inflation refuses to fade.

The buying frenzy was heavily skewed toward Asia. Regional gold funds notched their eighth consecutive month of inflows in April, with Hong Kong alone drawing a record $732 million into gold-linked products. In the West, sentiment remained more cautious. The SPDR Gold Shares exchange-traded fund saw a modest $180 million inflow over five trading days — a flicker of stabilization after $4.5 billion in year-to-date redemptions.

Central banks added further ballast, purchasing 243 tonnes of gold during the first quarter. Kazakhstan’s National Bank, Turkey, and Poland all continued to accumulate bullion in May, underscoring a long-term trend among emerging-market economies to reduce dollar exposure. This sovereign appetite has provided a steady floor under prices.

But the macro backdrop is pushing back against any sustained rally. April’s U.S. consumer price index accelerated to 3.8% — the highest in three years and up from 3.3% in March — while producer prices posted their biggest jump since 2022, driven by surging energy and trade costs tied to the conflict in the Middle East. Markets have fully priced out any Federal Reserve rate cuts this year, and the probability of a hike by December has risen to nearly 30%. For a zero-yielding asset like gold, that is a formidable headwind.

Geopolitical tensions remain a counterweight to monetary policy pressure. The recent Trump-Xi summit in Beijing ended without tangible progress on Iran, and reports of potential U.S. military operations against Tehran keep the Strait of Hormuz firmly in focus. Yet so far, these tailwinds have been insufficient to lift gold past the $4,700–$4,800 resistance zone — where repeated breakout attempts have failed. The metal closed Thursday at $4,687, down 0.7% on the week but still up 8% year to date. Its relative strength index sits at 49.8, a neutral reading, while 30-day volatility has settled at 18.2%. For now, gold is caught between record physical demand and a monetary roadblock that shows no signs of easing.