The joyful season is continuing in India with the celebration of Diwali and Dhanteras. Amidst this important backdrop, the country’s gold market is undergoing unprecedented change. High gold prices—up 60%, plus a 70% overall increase in silver prices—have changed consumer habits. Today, more Indians are choosing lighter jewellery or buying smaller gold coins in place of bulky pieces. This change is reflective of a larger trend where investment in gold is more popular than ever.
Retailers are moving at breakneck pace to their new reality. They have recently introduced gold coins with a weight as low as 250 milligrams, with milder gold coins even at 25 milligrams. With these changes, she wants to help keep customers in the loop while prices are climbing. Gold jewellery, especially in the form of weddings and gifts, rules the day in India’s total gold demand. The investment share is growing fast.
Households in India alone hold a staggering $3.8 trillion of gold, accounting for 88.8% of the country’s GDP. This massive wealth in yellow metal has attracted many to explore it as the perfect investment vehicle for festive season. Demand for gold exchange-traded funds (ETFs) has skyrocketed. This year, assets under management have surged more than 70%, as investors seek to diversify away from traditional jewelry.
The Indian central bank, Reserve Bank of India, plays a major role in guiding the gold market. It is supposed to increase gold’s proportion of foreign exchange reserves from 9% to a projected 14% by 2025. This trend highlights the increasing role of gold as a financial asset in India’s economy.
Although gold’s price is astonishingly high, consumers are still unwilling to give up on the cultural image of gold. The upcoming festive season creates an immense demand for gold and silver. Many Indians think that purchasing these metals on festivals invite wealth and prosperity.
Consumers aren’t communicating ‘I don’t want to buy’ Turns out, people aren’t saying ‘I don’t want to buy! Tanishq Gupta, echoing the skittish optimism found throughout consumer behavior, as Americans adapt to this new world of high-prices.
We heard a different story from retailers about how they have been responding to these new market dynamics. Prakash Pahlajani noted, “As a result, I have more customers this year,” indicating a shift towards more strategic purchasing rather than a decline in overall interest.
All segments of society are not equally prepared to absorb and adapt to these escalating costs. Madan Sabnavis remarked that while the affluent classes will likely continue their purchases, lower-income families face significant setbacks due to increased costs.
Bhavna, a retail customer, expressed her concerns about rising prices: “I am now having to think a lot while buying – about whether to even get something.” Her sentiments represent a broader trend seen across consumers, who are being extroverted as they weigh their options and spend big on what they love.
As economists Upasana Chachra and Bani Gambhir wrote recently, they have seen a marked increase in gold prices. This increase would help repair household balance sheets and produce a favorable wealth effect. By investing in gold and silver, households strengthen their financial defense against any economic storm.
Kaynat Chainwala emphasized India’s role in the global market, stating that it has become “a major pillar of global gold demand over the past three years.” This underscores the importance of India both inside its border economy and in terms of international markets as well.
Our favorite times of the year—the festive, joyful wedding seasons—at their peak. Retail demand for gold and silver remains extremely robust, setting records in recent weeks in spite of these high prices. Consumer desires are still sustained by the prevailing notion that buying these metals on propitious days brings success.