11-08-2025
High prices dampen gold demand in India, but festive season may bring back the shine
MUMBAI: At this time of the year, jewellery sellers in India usually report strong sales of gold as the festive and wedding season draws close, peaking with Diwali in November.
The precious metal is a status symbol in India, considered auspicious to buy during certain Hindu festivals. It is also a part of wedding dowries and serves as a way of storing wealth for many people.
But demand for gold in the world's most populous country has been slipping as prices near record highs, bolstered by global uncertainty and a weak Indian rupee.
LARGEST CONSUMER
India was the world's largest consumer of gold jewellery last year, purchasing more than 560 tonnes, according to data from the World Gold Council (WGC).
Its popularity is such that many neighbourhoods in cities like Mumbai are home to several jewellery shops.
Jewellery remains the predominant gateway through which most Indians purchase gold, but the metal's high prices have weighed heavily on buying sentiment this year.
Domestic prices have risen 28 per cent so far in 2025, hitting a record high of 101,078 rupees (US$1,200) per 10g in June.
According to the WGC, demand for gold in India fell by 10 per cent to 134.9 tonnes in the second quarter of this year, compared to the same period in 2024.
The WGC expects gold consumption in the country this year to fall to a five-year low, reported Reuters last month.
Demand for jewellery dropped 17 per cent in the April to June quarter, but this was offset by a 7 per cent increase in other gold investments including bars, digital gold, and exchange traded funds (ETFs).
'SAFE HAVEN' ASSET
Still, its cultural and religious significance could bring back the shine.
Lifestyle influencer Suhani Mendonsa said the price of gold – which has hit more than 10,000 rupees per gram – is not stopping her from purchasing the metal.
'Because the gold prices are so high, you buy jewellery in such a way that it's going to be an investment for you,' she told CNA.
Jewellers in India like Sunit Srimal are also optimistic that people will not stop buying, despite higher demand potentially pushing prices even higher in the approaching festive season.
'It's the glitter, the glamour, the reserve, the stability, the security of mind that if in future something goes wrong, there's always a gold reserve,' he added.
Gold is seen as a 'safe haven' asset around the world, drawing investors during times of uncertainty.
International gold prices have been rising over trade and geopolitical tensions, with its spot price breaking US$3,000 per ounce in March and surging to US$3,500 less than two months later.
Rates in India have been hitting new highs as the rupee has also depreciated against the United States dollar. This has made imported gold even more expensive in India.
Analysts say the coming weeks will be crucial.
'People would definitely buy gold in the festive season. The demand would be there - but in which form the people would buy? Would that be ETFs, bars and coins? Or would that be the jewellery demand?' noted Naveen Mathur, director of commodities and currencies at Anand Rathi Share and Stock Brokers.
'I would not be too gung-ho that people would go with bags full of money to buy gold this festival season, because of the prices,' he added.
