Despite short-term headwinds from the conflict in the Middle East, gold is expected to resume its forward momentum once the war concludes with the yearly average gold price forecast to surge by 43% to a new record high of $4 920/oz this year, precious metals research consultancy Metals Focus says.

In noting some of the key levers driving the current gold demand, the consultancy says there was modest growth in mine production, with recycling expected to lift total supply by 3.1% this year, while total gold demand is projected to decline by 2.3% as double-digit losses in jewellery and central bank purchases are largely offset by stronger physical investment, especially in gold coins and gold bars, which are both set to replace jewellery as the largest component of demand for the first time.

Global gold mine production grew by 2% year-on year to 3 817 t in 2025, driven by new mines, expansions and higher artisanal and small-scale gold mining. Global all-in sustaining costs rose by 12% year-on-year to $1 552/oz, underpinned by higher royalties and inflationary cost pressures.

This year, gold mine supply is forecast to increase again by 2.4% year-on-year to 3 907 t as output strengthens in all regions except for Oceania and Europe.

Net official sector purchases in 2025 fell by 22% year-on-year to a four-year low of 848 t and buying was spread geographically as US policy uncertainty encouraged further diversification. Further, sales were concentrated among a small number of countries, largely reflecting portfolio rebalancing after the price rally.

Exchange-traded product holdings rose by 803 t in 2025, marking the highest yearly inflow since 2020 with gains being widespread.

Metals Focus also notes that tariff uncertainty, rising US debt, concerns over the independence of the US Federal Reserve, and ongoing geopolitical turmoil have all enhanced gold’s investment appeal, as physical investment rose by 16%, reflecting a 12-year high, and strong price gains fuelled retail demand.

“Gold rallied strongly in 2025, by 44%, its best performance since 1980. Although net central bank purchases were roughly a fifth lower than the year before following three consecutive years of 1 000 t plus gold demand, the 2025 figure remained significantly about pre-2022 levels, with the official sector continuing to play a strategic role in the gold market,” says Metals Focus gold and silver director Matthew Piggott.

Electronics demand was effectively unchanged in 2025 as gains from the expansion of AI infrastructure were offset by weakness in consumer electronics. Moreover, decorative and other industrial fabrication contracted by 4.9% in 2025 to its lowest level since the Covid-19-affected 2020.

Piggott also highlights that a further shift by consumers away from jewellery, in favour of bars and coins, also contributed to last year’s dynamic, with China and India leading the gains with 28% and 17%, respectively.

Global jewellery fabrication demand fell sharply by 19% in 2025 to a five-year low of 1 646 t. Metals Focus notes that most countries saw losses in this category, as high prices dominated the trend, prompting light-weighting, carat shifts and some substitution from gold to platinum and plated or gold-filled jewellery. The decline is expected to continue by a further 11%, leaving fabrication only above a Covid-19-impacted 2020.

Additionally, global recycling rose by 2.8% year-on-year to a 13-year high of 1 404 t despite gold prices setting comfortable record yearly averages. This performance was driven by gains in Europe, as well as modest increases in most other regions, all of which offset notable weakness in South Asia.

Scrap supply is forecast to rise by 5.1% year-on-year this year as low near market stocks and the desire to retain gold as a safe haven limit gains despite sharply higher prices.

“More recently, losses following the January rally and range-bound prices have disappointed many individual investors, and a number of key bar and coin markets have been hit hard by high oil prices, eating into disposable incomes.

“That said, the drivers from 2025 remain intact: ongoing US policy uncertainty, persistent concerns about the dollar’s long-term outlook, elevated geopolitical risks, and stretched equity evaluations. Together, these factors reinforce gold’s role as a safe haven and portfolio diversifier, and we expect further all-time records to be achieved later this year,” Piggott concludes.