India's gold demand is showing signs of cooling down as prices continue to surge and wedding-related buying moderates. Several factors are contributing to this trend, including record-high gold prices, changing consumer behavior, and global economic uncertainties.
Gold prices in India have seen a substantial increase, with domestic prices rising significantly year-to-date. This surge has been driven by a weaker USD and heightened geopolitical risks, including tariff-led fears and uncertainty. Consequently, Indian domestic spot gold prices have mirrored this trend, rising sharply this year.
The rise in prices has led to a noticeable shift in consumer behavior. Many buyers are now hesitant to make purchases, adopting a "wait-and-watch" approach in the hope that prices will ease. This is particularly evident in the jewellery market, where demand has become limited to need-based purchases, especially for weddings. Some jewelers are reporting a sharp decline in footfall and sales, with purchases occurring only when absolutely necessary.
One significant trend is the increase in the exchange of old jewellery for new purchases. Anecdotal reports suggest that a substantial percentage of purchases now involve some form of exchange. While festive buying has continued, it remains modest and localized, often tied to specific regions and communities.
Despite the overall softening in demand, the investment appeal of gold is gaining prominence. Amid broader financial market turmoil and uncertainty, gold's role as a store of value is becoming more pronounced. This reflects a shift in consumer behavior from consumption-driven purchases to wealth preservation. Demand for gold bars and coins has been resilient, even at high price levels, supported by gold's safe-haven appeal.
Interestingly, while overall gold demand has been affected, corporate retail jewellers have reported strong growth. Earnings reports from leading jewellery retailers for the January-March quarter indicate robust performance, with average revenue growth up significantly year-on-year. This growth has been fueled by wedding-related demand, festive buying, and a noticeable consumer shift toward gold as both an adornment and a store of value. While high gold prices have tempered demand at the lower price points, the premium segments have remained fairly resilient.
However, gold ETFs (Exchange Traded Funds) in India experienced net outflows, diverging from the global trend. Despite this, investor interest in gold as an asset class continues to grow, with a substantial number of new investor accounts being added.
Looking ahead, seasonal and wedding-related purchases may provide some support to gold demand. Investor interest is also likely to strengthen as gold's appeal as a safe-haven asset and portfolio diversifier heightens amid global economic uncertainties and financial market volatility.
In conclusion, India's gold demand is currently facing headwinds due to rising prices and changing consumer behavior. While wedding-related buying has cooled, the investment appeal of gold remains strong. The market is expected to remain volatile in the near term, with demand influenced by a combination of seasonal factors, economic conditions, and global events.
