Institutional Demand for Gold Surges, Creating Supply Strain for Large Bullion Bars
Gold markets are witnessing an unprecedented surge in demand, particularly from institutional investors, leading to supply constraints for large gold bars. BullionStar, a leading Singapore-based precious metals dealer, has sounded the alarm on this unusual market shift, highlighting the tightening availability of one-kilogram gold bars from major suppliers.
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Rising Gold Demand Signals Market Shift
The global appetite for gold has been steadily increasing, but recent trends indicate that institutional investors are now driving the demand. Traditionally, gold market movements were fueled by retail buyers and individual investors. However, BullionStar recently reported that deep-pocketed institutional investors and high-net-worth individuals are now aggressively accumulating physical gold.
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Unlike previous surges—such as JPMorgan’s massive silver buy-up in 2010-2011 or the retail-driven silver squeeze of 2021—this latest trend is being led by large-scale investors seeking to secure their holdings outside of paper markets. This shift suggests a growing distrust in paper-backed gold assets, with some analysts pointing to paper-to-physical gold ratios as high as 600:1, indicating a significant disparity between physical holdings and their derivatives.
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Supply Chain Constraints Hit Large Gold Bars
As institutional investors scramble to acquire physical gold, major refiners and wholesalers are struggling to keep up. BullionStar revealed that three of its key suppliers—including a major Swiss refinery, a Swiss-Singaporean refinery, and a large unidentified wholesaler—are all facing supply shortages of one-kilogram gold bars.
The firm noted:
“Suppliers are surprised by the extraordinary demand despite gold prices remaining at elevated levels. This is an unusual trend, particularly in Asia, where buyers typically wait for price dips before purchasing gold.”
This supply squeeze underscores a fundamental shift in market behavior, as investors appear willing to pay premiums to secure physical bullion, regardless of spot price movements.
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Geopolitical and Economic Uncertainty Fueling Gold Rush
Gold’s recent price surge has been driven by escalating global economic uncertainty, particularly the ongoing trade tensions between the United States and China. Investors view gold as a safe-haven asset, and with economic instability on the rise, demand for physical bullion has intensified.
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Additionally, physical gold flows have seen a dramatic shift, with increasing shipments from Europe to North America. Swiss gold exports to the United States reached record levels in January 2025, with 193 metric tons exported in a single month—surpassing the total amount shipped throughout 2024. This surge is largely attributed to the price premium difference between gold markets in London and the United States, prompting a wave of gold refinements and reallocation.
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Conclusion: The Future of Gold Markets
The increasing demand for physical gold from institutional investors marks a significant transformation in the market. As financial uncertainty continues to loom, the trend of shifting away from paper gold assets in favor of tangible bullion is expected to persist.
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With supply constraints already evident, industry experts warn that if demand continues at its current pace, the availability of large gold bars could tighten further, potentially driving prices even higher. Investors and market participants will be closely watching these developments as gold cements its role as a critical hedge against economic volatility.
