Wealthy families and individuals concerned about US government debt levels likely drove a record surge in gold demand during the second quarter, according to an industry report, pushing the price to all-time highs this year.
Private purchases of gold surged to 329 tonnes from April to June, nearly five times higher than the previous quarter, according to the World Gold Council. This boosted overall gold demand to 1,258 tonnes for the quarter, the highest level for this period since records began in 2000, and a 4% increase from the previous year.
The gold price hit a record high of $2,483.60 per troy ounce earlier this month, driven by growing expectations of interest rate cuts—which would benefit non-yielding assets like bullion by reducing bond returns—and uncertainty over the US presidential election. The metal is currently trading at around $2,380 per troy ounce.
John Reade, chief market strategist at the WGC, suggested that wealthy US family offices were major buyers, motivated by concerns over uncontrolled fiscal deficits.
"I couldn't explain why gold was high. I was looking for the missing buyer, who might be people buying because of renewed or accelerating fears over US debt," he said.
Investors have become anxious about the ballooning US federal debt levels, especially if Republican presidential candidate Donald Trump wins in November. The Congressional Budget Office projects that US debt will surpass its World War II high of 106% of GDP by 2029, with its director earlier this year calling the fiscal burden "unprecedented."
Over-the-counter gold purchases, arranged privately by commercial banks, have become increasingly significant in the market. These transactions typically reflect buying to hedge speculative futures positions and demand from wealthy individuals.
Reade also noted strong buying activity in Singapore and Hong Kong from wealthy Asians, and from wealthy Turks turning to gold amid the dramatic devaluation of the lira.
This buying spree by wealthy individuals and families coincides with a recent positive turn in flows into gold-backed exchange-traded funds, signaling renewed interest from Western investors. June and July saw five consecutive weeks of inflows totaling 39 tonnes, following two years of consistent selling.
Central bank net purchases, which have contributed to a one-third rise in the gold price since early 2022, reached 483 tonnes in the first half of the year—a record for this period. However, there was a 39% drop between the first and second quarters, potentially making it less likely that central bank buying will exceed 1,000 tonnes this year, as it has for the past two years.
Meanwhile, Chinese consumers and investors, who were major drivers of gold’s surge in the first half of the year, have slowed their purchases after the People’s Bank of China paused buying in May.
Gold jewellery purchases have also declined due to higher prices, falling 19% to 390 tonnes in the second quarter compared with a year ago.
