Whalesbook
Gold Prices Soar, Reshaping Indian Buying Habits
In a significant shift driven by unprecedented price rallies, Indian consumers are increasingly opting for gold coins and bars over traditional jewellery. This change reflects a growing pragmatism in one of the world's largest gold markets, where the precious metal holds deep cultural and financial significance.
Prachi Kadam, a homemaker from Mumbai, exemplifies this trend. For years, she marked festive seasons with gold jewellery purchases. However, this year's record prices led her to choose a 10-gram gold coin instead of necklaces or bangles, citing the avoidance of an additional 15% in making charges as a key factor.
Price Surge and Global Factors
The global gold prices have seen a remarkable surge, increasing by 67% year-to-date, culminating in a record high of $4,549.7 per troy ounce on December 26. This upward trajectory has been influenced by strong demand for safe-haven assets, anticipated US interest rate cuts, and a weaker dollar. In India, domestic gold prices have climbed an even steeper 77% this year, significantly outpacing the Nifty 50 index's 9.7% gain. The fall in the Indian rupee against the dollar has further amplified these price increases.
Financial Implications and Shifting Demand
Analysts predict that this consumer behaviour adjustment is cushioning a potential drop in overall gold demand and is likely to persist into 2026. The trend mirrors a global slowdown in ornament purchases amidst soaring bullion prices. For many, the rising costs mean buying less gold or opting for lighter, more weight-conscious jewellery designs. Nibedita Chakraborty from Kolkata noted that even a reduction of six to seven grams in a necklace's weight can result in substantial savings of over ₹100,000 ($1,114).
Market Trends and Investment Appeal
Data from the World Gold Council (WGC) for the first nine months of 2025 reveals a 14% year-on-year decrease in India's total gold demand. Jewellery consumption fell by 26% to 278 metric tons, while investment demand saw a 13% rise to 185 tons. Investment now constitutes a record 40% of the total demand, highlighting gold's enduring role as a store of wealth.
Official Statements and Responses
Prithviraj Kothari, president of the India Bullion and Jewellers Association (IBJA), stated that the shift towards investment gold, including coins, bars, and gold ETFs, is expected to continue through 2026 due to gold's superior performance compared to other asset classes. India-listed gold-backed exchange-traded funds (ETFs) have already seen inflows of $3.3 billion, equivalent to 28.7 tons this year, increasing their total holdings to 86.2 tons.
Future Outlook
Industry consultancy Metals Focus forecasts that the subdued demand for jewellery will extend into 2026, projecting a further 9% decline in full-year jewellery consumption. This trend indicates a structural shift where affordability becomes a major factor, leading consumers to favour lower caratage and lighter designs. Santosh Kataria, chairman of DP Abhushan Ltd., noted a growing acceptance of 18-carat and 14-carat gold options, especially among younger demographics, who seek appealing designs suitable for everyday wear while managing their budgets.
Impact
This shift could significantly impact the traditional jewellery manufacturing and retail sector in India, potentially leading to reduced sales volumes for intricate, high-value pieces. Conversely, it could boost demand for bullion dealers, coin manufacturers, and gold ETF providers. For investors, gold's continued outperformance as an asset class reinforces its position in diversified portfolios, offering a hedge against inflation and currency fluctuations.
Impact Rating: 8/10
Difficult Terms Explained
- Bullion: Gold or other precious metals in bulk or unworked form, typically in bars or ingots.
- Troy ounce: A unit of weight used for precious metals, approximately equal to 31.1 grams.
- Nifty 50: A benchmark Indian stock market index representing the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange.
- Gold ETFs: Exchange-Traded Funds that track the price of gold, allowing investors to trade gold as easily as stocks.
- Caratage: A measure of the purity of gold. 24-carat is pure gold, while lower caratages like 18-carat (75% gold) or 14-carat (58.3% gold) contain other metals.