Southeast Asian Investors Keep Buying Gold as Global Appetite Weakens

Diverging Trajectories

Investors across Southeast Asia continued accumulating physical gold through the second quarter even as worldwide buying activity contracted. Purchases of bars and coins globally slipped 3% year-on-year to 307.1 tonnes in the April-June period, according to data released by the World Gold Council on July 30.

The regional outliers tell a different story. Indonesia recorded a 40% annual increase to reach 14.5 tonnes, marking one of the sharpest expansions in any major market. Thailand saw bar and coin purchases climb 10% to 10.9 tonnes, its strongest second quarter performance in seven years. Malaysia registered a 28% gain to 2.5 tonnes.

Spot gold traded near $4,069 per ounce in Singapore on Thursday afternoon, roughly 26% below the January peak of $5,500. That earlier record preceded a liquidity-driven selloff tied to escalating tensions in the Middle East.

Currency Pressures Drive Accumulation

The Indonesian uptick reflects persistent rupiah volatility and domestic economic anxieties, conditions that have reinforced bullion's traditional store-of-value appeal. Jakarta formalized its ambitions in the sector this year by publishing a roadmap designed to strengthen the domestic ecosystem and promote downstream processing.

In Thailand, price corrections in local gold terms sparked what market participants described as bargain hunting. Industry sources noted broader participation from younger demographics and rising interest in gold savings accounts, instruments that allow fractional accumulation without the logistical burden of storing physical metal.

Singapore logged a 6% annual rise in bar and coin purchases, reaching 2.3 tonnes. Buyers cited geopolitical uncertainty and portfolio diversification as primary motivations, a pattern consistent with the city-state's role as a regional safe-haven gateway.

Regulatory Friction and Import Constraints

Not every market followed the same arc. Vietnam's bar and coin purchases fell 31% to 6.5 tonnes, a contraction the World Gold Council attributed to tight import quotas that distorted pricing. Local premiums remained elevated enough to deter many would-be buyers, creating an artificial ceiling on activity.

Malaysia's 28% gain came despite regulatory uncertainty around imported bullion products, suggesting underlying demand proved strong enough to override administrative friction.

Asia ETF Inflows Hit Record Despite June Reversal

Asia-listed gold-backed exchange-traded funds recorded their strongest first-half inflow on record, even after shedding 15 tonnes in the second quarter. The June drawdown reflected Chinese investors rotating capital into domestic equities, which staged a rally during the period.

Globally, gold ETF holdings contracted by 45 tonnes in the quarter, with the bulk of that decline concentrated in June when investors withdrew 74 tonnes. The shift coincided with a modest uptick in real yield expectations and a firmer dollar, both of which typically weigh on bullion appeal in Western markets.

Louise Street, senior markets analyst at the World Gold Council, expects over-the-counter activity and Asian investor flows to play a more prominent role in the second half. Western ETF demand, she noted, will likely track real yields, Federal Reserve policy signals, and dollar strength more closely.

Jewellery Demand Softens Across the Region

High prices continued to suppress jewellery consumption. Singapore's jewellery purchases dropped 7% year-on-year to 1.4 tonnes, mirroring declines across Southeast Asian markets. Consumers increasingly shifted toward lower-carat pieces or substituted jewellery purchases with investment products such as bars and coins.

The trend underscores a broader pattern: when gold prices climb beyond comfort thresholds, retail buyers either downgrade quality or redirect spending into assets perceived as pure stores of value rather than adornment.

Central Bank Buying Accelerates

Official-sector purchases climbed 62% year-on-year to 288.9 tonnes in the second quarter, driven by renewed buying in multiple jurisdictions. A June survey conducted by the World Gold Council found that 45% of central bank respondents plan to increase reserves over the next twelve months.

Street expects central banks to remain significant buyers, though at a somewhat slower pace than the elevated levels seen over the past four years. The shift reflects a normalization of accumulation strategies rather than a retreat from gold as a reserve asset.

Outlook for the Second Half

Fan Shaokai, head of Asia-Pacific excluding China and global head of central banks at the World Gold Council, pointed to expanding access to investment products and accelerating market-development initiatives as factors likely to sustain demand in the region.

Street anticipates that the composition of global demand will continue shifting. Asian buyers, particularly in markets where currency weakness or economic uncertainty persists, are expected to anchor growth. Western investors, by contrast, may remain more reactive to monetary policy developments and yield dynamics.

The Federal Reserve held rates steady on July 29, a decision that prompted a modest 1% gain in gold prices the following day. Whether that stability translates into sustained Western ETF inflows or remains confined to Asian physical markets will shape the trajectory through year-end.