Gold’s Two-Faced Rally: Physical Demand Hits $193 Billion While Digital Gold Steals the Show

Global gold demand surged to a record $193 billion in Q1 2026, driven by central bank hoarding and Asian retail buying, while tokenized gold trading volumes exploded past $90 billion.

Global gold demand smashed through the $193 billion barrier in the first quarter of 2026, the highest quarterly value ever recorded, according to the World Gold Council. But beneath that headline number lies a market splitting into two distinct worlds — one where central banks and Asian retail investors are hoarding physical metal at a record pace, and another where a new generation of traders is piling into tokenized gold at a speed that has already eclipsed all of last year’s activity.

The volume of physical gold traded reached 1,231 tonnes, up a modest 2 percent year-on-year. The eye-popping value jump of 74 percent came courtesy of an average gold price of roughly $4,873 per ounce — a quarterly record. Spot gold currently trades at $4,575, roughly 5 percent below its 50-day moving average, though it still holds a gain of just over 5 percent since January 1.

Central Banks and Asian Investors Drive the Physical Surge

Central banks added an estimated 244 tonnes net to their reserves in the first quarter, surpassing both the previous quarter and the five-year average. The National Bank of Poland was the standout buyer, snapping up 31 tonnes to bring its total holdings to 582 tonnes — a notable move given that Governor Glapi?ski had previously hinted at possible gold sales. The People’s Bank of China added 7 tonnes, lifting its stash to 2,313 tonnes.

Retail demand for bars and coins surged 42 percent to 474 tonnes, the second-highest quarterly figure on record. China alone accounted for 207 tonnes, smashing the previous peak of 155 tonnes set in the second quarter of 2013. India, South Korea, and Japan also posted strong gains.

Gold-backed exchange-traded funds attracted inflows of 62 tonnes, though heavy outflows from US-listed funds in March put a significant dent in the pace.

Jewelry demand told a different story. Volumes collapsed 23 percent as sky-high prices curbed appetite, yet total spending on gold jewelry actually rose 31 percent, underscoring that buyers are willing to pay more for less. The sharpest declines were felt in China, India, and the Middle East.

Tokenized Gold Explodes onto the Scene

While physical gold ETFs have struggled to maintain momentum, the digital counterpart has gone viral. Trading volumes for tokenized gold hit $90.7 billion in the first quarter — a figure that already surpasses the entire volume recorded in 2025. Crypto traders, seeking refuge from inflation and geopolitical turmoil, have flocked to gold-backed tokens such as PAX Gold and Tether Gold, which now dominate spot trading in the sector.

The market capitalization of gold tokens grew 30 percent in the opening quarter, and the network registered over 44,500 new wallets — a record. The appeal is clear: tokenized gold eliminates storage costs and trading-hour restrictions, offering a flexible alternative for investors who want gold exposure without the logistical headaches of physical ownership.

Supply Constraints and the Fed Factor

Mine production hit a record for any first quarter, while recycling activity inched up just 5 percent despite elevated prices — a sign that the market is tightening. The World Gold Council expects moderate growth in mine output for 2026, though potential energy shortages in Oceania and Asia could cloud the outlook.

The central bank buying target for the full year remains between 700 and 900 tonnes. But the biggest headwind for gold remains monetary policy. According to the CME Group, roughly 95 percent of market participants expect US interest rates to remain unchanged in June. As long as rates stay elevated, Western investors will continue to feel the opportunity cost of holding a non-yielding asset — leaving the market’s momentum largely in Asian hands.

Goldman Sachs analysts have set a price target of $5,400 per ounce, though they caution that a correction in equity markets could trigger forced selling of gold. For now, the metal is trading below its medium-term average of around $4,833, searching for direction.

The digital gold boom, meanwhile, shows no signs of cooling. As long as central banks hesitate to cut rates, the flight into tokenized gold as a flexible, accessible alternative looks set to continue — even as the physical market grapples with its own record-breaking contradictions.