Western investors piling into gold in the pandemic are more than making up for a collapse in demand from traditional retail buyers in China and India, helping push prices to an eight-year high.
Inflows into exchange-traded funds - mostly in North America and Europe - are inches away from the annual record set in 2009, according to data compiled by Bloomberg.
Demand in China and India, the world's two biggest buyers of gold bars, coins and jewellery, plunged after the coronavirus stalled imports and emptied malls. Sales have been slow to return as rising prices deter buyers.
The shift underscores the global push-and-pull for gold between western investors looking for a safe haven and traditional demand centres for physical gold in Asia. It also raises crucial questions for the market as gold prices risk losing support if ETF inflows slow, or could gain even more momentum if Chinese and Indian demand bounces back.
"We expect the US and European investors to remain interested in gold regardless of Asian demand," said Darwei Kung, head of commodities and portfolio manager at DWS Investment Management Americas.
"If the buying pattern were to go up as well for China and India at the same time as what you see in the ETF market, then the price would have come up even further."
Fear-driven investment demand in developed countries has contributed about 18pc to this year's gain in gold prices, while weaker buying by emerging-market consumers provided an 8pc drag, Goldman Sachs estimated in a June note. An economic recovery and a weaker dollar may mean emerging-market demand in the second half of the year could "shift from being a drag on gold prices to a tailwind".
Still, higher gold prices could exacerbate "demand destruction" in the East and make prices even more dependent on investors in the West, said Commerzbank AG analyst Carsten Fritsch.
Spot gold has risen 17pc, closing out the second quarter with the largest rally in more than four years. Last Tuesday, gold futures on the Comex topped $1,800 an ounce for the first time since 2011.
The higher prices have had a chilling effect on Asian shoppers. Traditionally seen as a store of wealth, demand for jewellery in China and India tumbled as lockdowns bit.