India, the world's largest consumer of gold jewellery in 2024, is witnessing a slowdown in gold demand due to soaring prices, which have reached record highs in recent months. However, the upcoming festive season, traditionally a period of strong gold purchases, may offer a glimmer of hope for a rebound in demand.
Impact of High Prices
The World Gold Council (WGC) expects India's gold consumption to fall to a five-year low in 2025, potentially ranging between 600 and 700 metric tons, a significant drop from the 802.8 tons consumed in 2024. CEO of WGC's Indian operations, Sachin Jain, told Reuters that record-high prices are primarily responsible for the decline, particularly impacting jewellery purchases. Local gold prices reached a record high of ₹101,078 per 10 grams in June 2025, marking a 28% increase so far in 2025, following a 21% gain in 2024. As of August 7, 2025, 24-carat gold reached Rs 1,02,550 per 10g.
The high prices have led to a shift in consumer behavior. Many are opting for lightweight jewellery, exchanging old gold for new designs, or postponing purchases. Some jewelers are offering discounts on making charges and diamond jewellery to attract customers. In the April-to-June quarter, India's gold consumption fell 10% year-on-year to 134.9 tons, driven by a 17% drop in jewellery demand.
Investment Demand on the Rise
Despite the challenges in the jewellery market, investment demand for gold has been increasing. Gold has outperformed other asset classes, attracting investors to both physical gold and gold exchange-traded funds (ETFs). Gold ETFs in India are gaining popularity as the country becomes more digitized. In June 2025, Indian gold ETFs saw a significant surge in inflows, outpacing peers across Asia. The cumulative assets under management (AUM) of the 20 gold ETFs rose to INR624 billion (US$7.3 billion), marking a 97% year-on-year and 2% month-on-month increase.
Festive Season Hope
The festive season, which begins in mid-August and peaks with Diwali in November, is traditionally a period of strong gold demand in India. Gold is considered auspicious to buy during certain Hindu festivals and is an integral part of wedding dowries. The months of June and July are typically an off-season for gold, especially for jewellery. A recovery in demand is expected with the beginning of the auspicious buying season from mid-August.
Several festivals, including Rakhi, Ganesh Utsav, Navratri, Dussehra, and Diwali, are considered auspicious for gold purchases. Refineries around the world are already preparing for India's August to Diwali surge. Analysts anticipate that domestic prices will remain firm in the near term as the festive season and wedding season approach.
Factors Influencing Gold Prices
Several factors influence gold prices in India, including:
Future Outlook
While high prices have dampened gold demand in India, the upcoming festive season may bring a resurgence in sales. Investment demand is expected to remain resilient, supported by sustained investor interest. If prices stabilize, demand could reach 700 tons; however, a further price increase of 10-15% due to geopolitical factors could bring it down to the lower end of the range. Some reports suggest gold prices could potentially exceed ₹60,000 per 10 grams in the near term. Overall, the future trend of gold in India is expected to remain strong due to ongoing global economic uncertainties and inflationary pressures.
