$132 Billion in Gold Bought... But Who’s Really Buying? | Joseph Cavatoni
What this covers
Joseph Cavatoni, Chief Market Strategist at the World Gold Council, discusses Q2's record $132 billion in gold demand with Jeremy Saffron, examining which buyers drove it and what it means for price momentum ahead. The 22-minute interview unpacks a paradox: total volume grew modestly at 1,249 tons year-over-year, yet dollar value hit an all-time high—signaling that structural investment strength, not mere speculation or price momentum, now anchors the market. Cavatoni lays out a thesis of compositional shift: traditional retail and jewelry buyers have retreated sharply under high prices, while institutional capital, central banks, and off-market OTC players have stepped in to fill the gap and then some. The conversation moves through geographic divergence, the role of ETF flows, and the measurement puzzle of unreported sovereign accumulation.
The discussion covers a widening fracture in demand patterns. US bar and coin purchases collapsed 53 percent to their lowest point in five years, while Chinese demand surged 44 percent—a reversal Cavatoni traces to shifting political risk appetite rather than pure price elasticity. Jewelry demand in India and China has plummeted to near pandemic lows, a decline he argues requires product redesign toward lower price points before recovery sets in. Central banks accumulated a near-record 166 tons in Q2, with over half from unnamed official sources, a movement he frames as dollar diversification rather than cyclical buying. ETF flows, though modest in absolute terms, are "sticky"—attracting no outflows—and signal a tipping point in European participation. Cavatoni identifies Fed rate cuts and dollar weakness as the critical catalysts for the next leg, while cautioning that the gold market's architecture itself has fundamentally shifted in both who trades it and which channels carry the volume.
Cavatoni argues the gold market has structurally shifted: demand growth is now driven by sticky institutional/OTC investment, ETF flows, and central bank accumulation diversifying away from a weakening dollar, while traditional retail and jewelry demand falter under high prices, with the next leg higher dependent on Fed rate cuts and dollar weakness.
- Record dollar demand despite modest volume reflects structural investment buying, not just price
- Central banks continue near-record gold accumulation, much of it unreported, as a reserve diversification move
- Fed rate cuts and dollar weakness are the key catalysts for the next move higher in gold
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Gold's portability and security make it a store of value in times of conflict; Iran's outlier jewelry demand growth likely reflects gold's role as wearable, portable wealth one can carry to flee a country, combined with limited access to exchange-traded gold products in that market.
“if an an individual is looking at what can I put on my wrist around my neck to get out of a country, I think ultimately um gold can play a role like that in a market like Iran. So I think that there is a sense of saving, there is a sense of portability, there is a sense of security”
Unreported sovereign gold buying carries genuine measurement uncertainty due to time lags and entities used for specific purposes, but the World Gold Council validates its data through partners like Metals Focus, and countries sometimes declare accumulation months later under the IMF framework.
“we spend a lot of time working with metals focus have a very robust process of validating their data... There might be a time lag. There might be um an entity that's being used for a particular purpose... we have had examples in the past where several months after the accumulation has taken place a particular country might come out and make the declaration under the IMF framework.”
Global jewelry demand has fallen to near pandemic-era lows (China down 20%, India down 17%) because the segment is more price-sensitive than investment; recovery requires recycled gold to come online and jewelry fabricators to design lower-price-point, more accessible products, which takes time and is only beginning (e.g., smaller consumable designs in China).
“China was down 20%, India down 17%. That's a big hit for the base”
US asset managers are now discussing 2-5% gold allocations, up from the historical roughly 1.25%, accompanied by messaging that gold is sticky and that investors should hold or add rather than sell.
“this is a market that's actually looking at more like 2 to 5% allocations. That's what asset managers are talking about. It's not this one one and a quarter that we've heard in the past... it's sticky, don't sell. If anything, add to your allocation.”
Recycling rose only ~4% despite high prices and rapid 25-27% year-to-date price growth, which signals that holders (jewelry and investment) expect further price upside and are reluctant to sell; rising pledged-gold collateral in India means financial stress could later trigger liquidation and a supply surge.
“recycling rose just 4%. It's it's kind of muted... in India pledged gold jewelry used as collateral for loans is is kind of spiking”
China allowing insurers to hold physical gold under a pilot program signals institutions and regulators understanding portfolio diversification and gold's benefits, potentially opening a new institutional demand base — though it remains a pilot and should not be over-hyped.
“They've they've now allowed insurers to hold physical gold... opening up this channel under pilot program... that pilot program in works tells us that the government, the regulators... and insurers are understanding portfolio diversification and the benefits of gold as an asset allocation”
OTC demand (about 170 tons, roughly matching ETF demand) consists of investment dollars put into physical gold without a disclosure mechanism — private banks, wealth offices, physical buyers, and some undisclosed institutional stock — and represents consumption consistent with long-term holding.
“it's anywhere where you're having investment dollars being put to work on the physical form of gold that basically doesn't have a disclosure mechanism. So that would include private banks, that would include wealth offices, that would include those that are buying in physical form”
Net central bank gold demand was 166 tons in Q2 with over half (about 90 tons) from unreported sources; though down from 240 tons in Q1, this remains at or near record levels and reflects ongoing diversification away from a weakening dollar and dollar assets, expected to continue (though perhaps below the 1,000+ ton record pace) and showing more price sensitivity than expected.
“the report showed 166 tons in net central bank demand more than half of that I think 90 tons came from these unreported sources”
Mine production hit a Q2 record of about 99 tons but all-in sustaining costs rose above ~$1,530 per ounce, squeezed by energy and labor costs; production growth remains below the pace of demand growth.
“mine production hit a Q2 record, 99 tons, but average all-in sustaining costs kind of rose over about $1,530 per ounce”
Total Q2 gold demand was modest in volume (about 1,249 tons, +3% year-over-year) but hit a record in dollar terms at $132 billion, indicating the case for gold remains structurally strong among investors rather than being purely price-driven.
“total gold demand in Q2 came in at 1,23 49 tons... That's only 3% year-over-year increase. But in dollar terms, I mean, demand actually hit a record, $132 billion.”
ETF flows, while not the largest share of investment, demonstrate that investment dollars can move quickly and meaningfully; the flows are 'sticky' because they are not seeing outflows, and Europe is a market that could reach a tipping point producing rapid inflows given its lagging participation relative to record North American and Asian flows.
“these are the ETF flows, which still isn't the lion share of where investment is basically being held. The investment being held in OTC flows... what it does tell us when we see the flows in ETFs that the investment dollars are quick to move and they can move and be meaningful. I think Europe is the one market that I continue to watch”
Current gold investment buying is structural rather than speculative, with investors holding and adding to gold exposure while waiting to see how monetary policy develops; weakening employment data, potential Fed rate cuts, and a weakening dollar are key catalysts for gold.
“I think it's structural. So, what I think we're hearing and seeing more and more from investors is waiting and seeing for what exactly is going to develop on the monetary side... that is a key catalyst for gold. when the Fed will move on rates, when the dollar will show signs of weakness”
The most underappreciated trend for the next 90 days to 6 months is investors' appetite for risk assets and their willingness to sustain shocks; China and the US are the two markets to watch as they will signal the broader risk outlook and the trajectory of gold investment demand.
“the key thing to keep a close watch on for the next 90 days to call it 6 months would be the appetite for risk assets from investors. Their willingness to take risk and sustain kind of shocks... keep all eyes on China as well because those two markets will give us a big significant outlook for risk asset”
The US labor market is buckling: July payrolls rose only 73,000, but downward revisions wiped nearly a quarter million jobs off May and June, bringing the 3-month average to just 35,000 — the weakest run since the pandemic — while unemployment rises and participation falls.
“July payrolls rose by 73,000. But the real damages in the revisions nearly a quarter million. A quarter million jobs wiped off the books from May and June. The 3-month average now sits at just 35,000. That's the weakest run since the pandemic.”
Bar and coin demand diverged sharply by region: China jumped 44% to about 115 tons while US demand collapsed 53% to 8.8 tons, the lowest in five years, because US bar/coin buying is historically driven by political/fiscal anxiety (typically under Democratic administrations) and those conditions are currently less present.
“China demand jumped 44% to uh what 115 tons and in the US it happened to collapse by 53% down to 8.8 tons the lowest level in 5 years.”
A 50 basis point Fed rate cut in September would act as a major catalyst pushing gold higher, providing the next systemic move via lower rates and dollar weakness that prompts investors to reassess portfolio risk.
“it will push gold upwards and then basically it will be a catalyst that we've been talking to... a big conditional move for for gold to kind of get its next wave up... and that will likely be the move in rates and the actual weakness of the dollar”
The economic outlook for the US and major global markets remains supportive of gold prices; even downward forecast revisions keep gold in positive territory, with price appreciation expected through year-end and into 2026, contingent on patience through news-driven headwinds.
“we see those economic conditions continuing to be quite supportive of those that are calling for price appreciation between now and the end of the year, but also into 2026... you're going to see some bit of uh price headwinds when it comes to certain noise and news”
Gold caught a bid after the economic data release, testing around $3,350 an ounce.
“gold is catching a bid here after this economic data release testing around 3350 an ounce”
The gold market has fundamentally changed: the players are different, flows are moving in the dark, and the old demand drivers are no longer what they used to be.
“this isn't the same gold market. The players are changing and the flows are moving in the dark. The old demand drivers aren't what they used to be.”