Gold’s New Landscape: Rise in ETF and Crypto-Backed Token Purchases Amid Decreased Central Bank Demand
The gold market is witnessing a shift in activity, with central bank buying slowing and demand from exchange-traded funds and gold-backed cryptocurrencies growing. The latter recently reached a three-year high, as indicated by the net minting volume for tokens backed by the precious metal.
Over $80 million worth of these tokens were minted over the past month, according to data from rwa.xyz. This increase helped push the sector’s market cap up by 6% to $1.43 billion. Meanwhile, monthly transfer volume surged by 77% to $1.27 billion, reflecting a notable resurgence of interest in digital representations of gold.
The rise in token activity aligns with a broader trend in the gold market. The World Gold Council’s latest report indicates that total gold demand in the first quarter of the year reached 1,206 tonnes—a 1% year-over-year increase and the strongest first quarter since 2016. This surge occurred despite a decline in central bank purchases, which fell to 244 tonnes, down from 365 tonnes in the fourth quarter.
Gold ETFs have played a crucial role in this shift. Investment demand has more than doubled to 552 tonnes, suggesting that investors are increasingly turning to the precious metal, a behavior historically associated with central banks.
These inflows contributed to pushing the average quarterly price of gold to a record $2,860 per ounce, marking a 38% increase from the previous year. However, the price dipped 2.35% last week after rising 23.5% year-to-date, while risk assets, including cryptocurrencies, increased. Spot gold is currently trading at $3,240.
While traditional gold demand, such as jewelry, experienced a downturn—dropping to pandemic-era lows—bar and coin demand remained elevated, particularly in China.
