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India's Gold Market Shifts: Investment Demand Rises as Jewellery Sales Fall

India's gold market is undergoing a significant shift as soaring prices dampen jewellery consumption, leading to a 26% year-on-year decline in the first half of FY26. Conversely, investment demand for bars, coins, and ETFs has skyrocketed, with increases of 74% and 60% respectively. Despite the jewellery slowdown, India has emerged as the world's largest gold jewellery consumer, accounting for 30% of global demand, driven by cultural factors like weddings. The market's medium-term growth is expected to be supported by this rising investment demand, the expansion of organised players, and ongoing significant purchases by central banks.

Key Points: India's Gold Market Shifts from Jewellery to Investment Demand

  • Jewellery demand fell 26% in H1 FY26
  • Investment demand for bars/coins surged 74%
  • India is world's top gold jewellery consumer
  • Central bank buying supports high prices
  • Organised sector expands in tier 2/3 cities
2 min read

India's gold market shifts toward investment demand as jewellery sales fall

High gold prices drive a 26% drop in India's jewellery demand but spur a 74% jump in investment demand for bars and coins, a new report finds.

"Going ahead, high prices may continue to weigh on jewellery demand in the near term, though rising investment demand... are expected to support the sector's medium-term growth. - ICRA & Assocham Report"

New Delhi, March 27

India's gold market is shifting toward investment‑driven demand as high prices weigh on jewellery consumption, a report said on Friday.

The joint report from ICRA and Assocham said that India's gold jewellery demand declined about 26 per cent year‑on‑year in the first half of FY26, with a 15 per cent rise in demand for bars and coins partly offsetting the dip.

Global gold jewellery consumption fell 15 per cent in FY25 and a further 17 per cent in the first half of FY26 due to rising prices.

However, investment demand for bars, coins and exchange‑traded funds jumped 74 per cent and 60 per cent, respectively year‑on‑year.

"Going ahead, high prices may continue to weigh on jewellery demand in the near term, though rising investment demand, expansion of organised players and increasing financialization are expected to support the sector's medium-term growth," the report predicted.

India emerged as the world's largest gold jewellery consumer, surpassing China, accounting for 30 per cent of global demand in FY25, supported by strong cultural demand linked to weddings and festivals.

Central banks have remained significant buyers of gold in recent years, with annual purchases exceeding 1,000 tonnes between FY2023 and FY2025, supporting prices amid global economic uncertainty.

Gold prices rose around 33 per cent in FY25 and over 50 per cent so far in the current fiscal, driven by central bank buying, geopolitical tensions and depreciation of the rupee against the US dollar.

On the supply side, India continues to rely heavily on imports due to limited domestic mining, with imports accounting for around 85-88 per cent of the total supply in recent years.

Global mine production has remained relatively stable in recent years providing 70 per cent of supply. The report noted that gold recycling has gained some traction in India in recent years, partially supplementing supply.

Mandatory hallmarking has also significantly improved purity assurance and recycling efficiency, it said, lauding India Good Delivery Standards (IGDS) for strengthening domestic refining and aligning Indian bars with global benchmarks.

The organised segment accounts for around 40 per cent of the gold jewellery market, with players expanding through franchise-led models and increasing presence in tier 2 and 3 cities, the report estimated.

- IANS

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Reader Comments

R
Rohit P
Gold is gold, whether it's a necklace or a bar! 🪙 The investment demand surge shows people are becoming smarter. Jewelry has making charges and GST. Pure gold for investment is the way to go if you want to preserve wealth.
A
Aditya G
It's a bit sad, though. Gold jewellery is such a big part of our culture - for festivals, weddings, gifts. I hope this is just a temporary phase due to high prices and not a permanent cultural shift.
S
Sarah B
The report mentions mandatory hallmarking improving purity. This is a huge positive step for consumers. For too long, trusting the local jeweller was a leap of faith. Now with more organised players and standards, it builds confidence.
V
Vikram M
While investment demand is good, our heavy reliance on imports (85-88%!) is a major concern for the economy. We need to seriously look at domestic mining or better recycling. Every dollar spent on gold imports affects our trade deficit.
K
Kavya N
For the middle class, buying a small coin every month through SIP in digital gold or ETFs is much more feasible than saving for a heavy necklace. The financialization of gold is a welcome change. Makes it accessible.

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