Gold is back in demand – and the buyers are broadening

Trends in gold investment products suggest the metal is increasingly being used not simply as an inflation hedge, but as a broader portfolio diversifier against geopolitical, fiscal, currency and market-concentration risks. 

Exchange-traded commodities (ETCs, which are gold products in Europe) and Exchange Traded Funds (ETFs – gold products in the US) show that Western investors have been rebuilding gold positions, Asian demand remains significant and several central banks continue to add to their reserves. 

Flows of funds have moved around considerably as investors responded to changes in interest-rate expectations, movements in the US dollar and geopolitical risk. But the underlying picture is clear – there has been a pickup in demand from both European and US investors, particularly during August at the same time as central-bank purchases continue to provide a separate, more structural source of demand

European investors have returned in force

In Europe, gold products (ETCs) returned to net inflows in July, which followed a more mixed first half of the year. Our data chart shows that European demand accelerated considerably during August, with investors increasing allocations across a number of the large physically backed gold ETCs.

Why are European investors buying?

The obvious explanation is safe-haven demand, but the investment case appears to have become broader than that. Geopolitical uncertainty remains elevated, while concerns around government borrowing and fiscal sustainability have become more prominent. At the same time, government bonds themselves have experienced periods of significant volatility. Gold therefore provides something quite different: an asset that is not dependent on a company delivering earnings or a government making coupon and principal payments.

There is also a portfolio-construction argument. Equity indices have become increasingly concentrated in a relatively small number of US technology and Asian semiconductor companies. Gold offers a return stream driven by a very different set of factors, which can make it useful as a diversifier rather than simply a directional bet on the gold price.

US investors are returning too

North American gold products (ETFs) recorded approximately $7bn of outflows during the first half of 2026 – with much of the selling concentrated in March and June rather than representing a consistent withdrawal from gold throughout the period. 

Flows subsequently began to improve, with US buying accelerating more clearly during August. This stop-start pattern makes sense. Gold pays no income, so rising real yields can increase the opportunity cost of holding it. Changes in expectations for Federal Reserve policy, bond yields and the US dollar can therefore have an important influence on short-term gold ETF demand.

But those headwinds are now competing with other concerns. Inflation uncertainty, government debt, geopolitics and equity-market concentration are all reasons investors may want to retain some gold even when cash and government bonds offer relatively attractive yields.

Central banks are buying for different reasons

ETF and ETC investors can move in and out of the gold products quickly. Central-bank buying is potentially a much more structural part of the story.

Central banks bought more than 1,000 tonnes of gold annually between 2022 and 2024, materially changing the demand backdrop for the metal. Purchases have moderated in 2026 but remain significant.

The motivation is different from that of an ETC or ETF investor. Gold has no issuing government and no corresponding counterparty liability. For a central bank managing national reserves, that makes it useful for diversifying exposure away from individual currencies and sovereign issuers.

This does not necessarily mean central banks are abandoning the US dollar. A better explanation may be that many central banks are increasing gold as a complementary reserve asset, particularly against a backdrop of geopolitical fragmentation and concerns over the security and accessibility of overseas reserves.

There has even been a recent example of this closer to home. The Dutch central bank has moved approximately 86 tonnes of gold from New York and Canada to London, citing increasing geopolitical uncertainty and the benefits of having bullion readily tradable in London during a crisis. 

China adds another dimension

Chinese investors have been significant buyers of domestic gold ETFs, while the People's Bank of China has continued increasing its reserves. For private investors, gold also provides an alternative to domestic property and equity markets, which have faced challenges in recent years.

This creates an unusual combination - western investors are using gold increasingly as a portfolio diversifier, Chinese investors have their own domestic reasons for allocating to it, and central banks are treating it as a strategic reserve asset.

What does this mean for investors?

The flow data is important because it tells us something that price performance alone cannot.

A rising gold price can simply reflect existing holders benefiting from higher prices. But when we see new shares being created in physically backed ETCs or ETFs, additional bullion entering their vaults and central banks simultaneously increasing reserves, it shows that the underlying demand base itself is broadening.

iShares Physical Gold ETC (European domiciled) is a good example. It has become an increasingly sizeable vehicle for European gold exposure, with approximately $39.3bn of assets (rising from $35.3bn in June) and almost nine million ounces of physical gold held with the custodian. Its scale also illustrates how exchange-traded products have changed the gold market - investors can now make sizeable tactical or strategic allocations without having to arrange the purchase, storage and insurance of physical bullion themselves.

There are still clear risks. Gold produces no earnings, dividend or coupon, and higher real interest rates can make income-producing assets comparatively more attractive. Gold prices can also be volatile, and strong flows do not guarantee further price appreciation.

But that is not really the main point of holding gold in a diversified portfolio. Its attraction is that its return drivers are different.

For investors, holding gold in a portfolio can be seen as a diversified asset – but so far this year gold is not being bought by one type of investor for one reason also. European and US ETC/ETF investors have resumed buying gold, Asian investment demand remains significant and central banks continue to accumulate reserves.