India Gold Market Update: Festive Season Boosts Demand (2025)

India's Gold Market Sparkles Amid Festive Cheer, But Can the Rally Last?

The Indian gold market is glowing brighter than ever as the festive season kicks into high gear. But here’s where it gets controversial: while the surge in gold prices has investors and jewelers celebrating, it’s also raising questions about affordability and sustainability. Let’s dive into the dazzling details.

A Festive Frenzy Fueled by Record Prices

Gold prices have been on an unprecedented rally, hitting 48 all-time highs this year alone. In September, international prices soared by 11.6%, followed by another 7.9% jump in early October, breaching the $4,000/oz milestone. Domestically, the trend mirrors this surge, with prices climbing 66% year-to-date, amplified by the weakening Indian rupee. This isn’t just a blip—it’s the largest increase in 45 years.

But this is the part most people miss: the domestic market has been trading at a premium over international prices since mid-September, reaching $25/oz by mid-October. This premium reflects the unique dynamics of India’s festive demand, where gold isn’t just an investment—it’s a cultural cornerstone.

Festive Sales Shine, But Not Without Challenges

The festive season has started strong, with both investment demand and jewelry sales driving momentum. However, the sky-high prices are reshaping consumer behavior. Wedding-related purchases are booming, but buyers are opting for lighter, lower-carat pieces to stay within budget. This shift is a double-edged sword: while retailers’ revenues are up, overall volume demand is likely to dip due to affordability concerns.

Retailer feedback paints a mixed picture. Large chain stores are thriving with lighter jewelry options, while high-end independent stores catering to weddings are seeing robust sales. In contrast, smaller stores are struggling as footfall declines.

Listed Jewelers Sparkle Despite Headwinds

Despite record-high gold prices and a high base effect from last year’s customs duty cut, listed jewelers reported impressive revenue growth in the July-September quarter, ranging from 6.5% to 63%. Early festive celebrations, strong wedding demand, and innovative marketing strategies—like old gold exchange offers and lightweight jewelry options—have kept the momentum going.

Digital channels are also playing a bigger role, with some retailers doubling their online revenue year-over-year. However, the question remains: can this growth be sustained as prices continue to climb?

Gold ETFs: A Global and Local Phenomenon

Indian gold ETFs saw their largest-ever monthly net inflows in September, totaling INR83.6 billion ($947 million), a 282% month-on-month increase. Assets under management hit an all-time high of INR901.4 billion ($10.2 billion), driven by record investor participation. Retail investors dominate in numbers, but corporates and high-net-worth individuals (HNIs) hold the lion’s share of assets, signaling a shift toward portfolio diversification.

Early October data suggests this trend is continuing, but here’s a thought-provoking question: Are gold ETFs becoming the new gold standard for investment, or is this surge a temporary reaction to market volatility?

RBI’s Modest Gold Reserve Addition

The Reserve Bank of India added just 0.2 metric tons to its gold reserves in September, bringing the total to 880.2 metric tons. While this is a modest increase compared to last year, the share of gold in India’s foreign exchange reserves has jumped from 9% to 14%, largely due to valuation gains from rising prices.

Imports Surge on Seasonal and Investment Demand

Gold imports hit a 10-month high in September, totaling $9.16 billion, a 77% month-on-month increase. This surge reflects seasonal buying ahead of festivals and robust investment demand. But with prices at record levels, how long can this import momentum last?

Looking Ahead: A Golden Future or a Pricey Pitfall?

Expectations for a strong festive season remain high, driven by continued demand for investment products and wedding jewelry. Increased disposable income, thanks to GST cuts and low inflation, could further boost gold’s appeal. However, the broader jewelry market faces challenges as high prices weigh on affordability.

As gold continues its extraordinary rally, it’s worth asking: Is this a trend or a turning point? And more importantly, how will Indian consumers and investors adapt to this new reality?

What’s your take? Do you see gold’s rally as a sustainable trend or a bubble waiting to burst? Share your thoughts in the comments!