Gold and Silver prices have been rising over the last few months with the rise being close to madness during January 2026. As the world has witnessed uncertainty and geopolitical risks, buying in safe-haven assets has gone up. While Bitcoin and other cryptocurrencies remain under selling pressure, Gold and Silver have been printing new all-time highs on majority of trading sessions during January 2026. As gold becomes expensive, it is natural that actual use of Gold as jewellery would reduce in the Indian market which has been traditionally the biggest end-user market for the precious metal. Central banks are buying gold for the last few years and that has kept the demand strong. Another major factor is high trading volume in paper gold which has also led to higher allocation by exchanges. TopNews Team has reviewed Gold's actual consumption and buying by commodity exchanges for short term investors and traders in bullion.

India’s Gold Market Undergoes a Structural Reset as Investment Demand Overtakes Tradition

India’s gold market is undergoing one of its most consequential transitions in decades. While record prices have suppressed physical jewelry consumption, they have simultaneously catalyzed an unprecedented surge in investment-led demand—particularly through ETFs and digital channels. Central banks globally continue to accumulate gold at historically elevated levels, reinforcing bullion’s role as a strategic reserve asset amid geopolitical and monetary uncertainty. In India, this evolving dynamic is reflected in shrinking jewelry volumes, expanding value-driven consumer behavior, and a decisive pivot toward financialized gold exposure. The data paints a clear picture: gold in India is no longer merely ornamental—it is increasingly strategic, financial, and institutional in nature.

Jewelry Demand Contracts Sharply as Price Sensitivity Reshapes Consumer Behavior

India’s gold jewelry market faced a pronounced contraction in 2025 as elevated prices materially altered purchasing behavior. Jewelry demand declined 24% year-on-year to 430.5 tonnes, down from 563.4 tonnes in 2024, marking one of the steepest annual volume declines in recent years. This contraction was particularly visible in the seasonally critical fourth quarter, where volumes fell 23% to 145.3 tonnes, despite the traditionally supportive wedding calendar.

Yet the decline in tonnage masks a more complex reality. In value terms, jewelry demand rose 12% to Rs.4,54,390 crore, reflecting the direct impact of record gold prices rather than a revival in consumption appetite. Consumers remained active, but their purchasing decisions were governed by strict budget discipline rather than discretionary indulgence.

Retail behavior underscores this shift. More than 40% of jewelry sales were driven by old-gold exchange programs, as households recycled existing assets to offset price pressures. Buyers increasingly gravitated toward lightweight designs, lower making charges, and alternative purity formats. While 22-carat gold continues to dominate culturally significant purchases—particularly weddings—there has been a notable rise in demand for 18k and 14k jewelry, signaling a pragmatic adaptation to affordability constraints.

Total Gold Demand Falls in Volume but Surges in Value

The contraction in jewelry consumption weighed on India’s overall gold demand profile in 2025. Total gold demand declined 11% to 710.9 tonnes, compared with 802.8 tonnes in 2024. Imports mirrored this slowdown, falling 17% to 663.7 tonnes, consistent with softer physical offtake.

However, the value dimension tells a radically different story. Aggregate gold demand value jumped 30% to Rs.7,51,490 crore, driven almost entirely by price appreciation. This divergence between volume and value highlights a market transitioning away from consumption-led demand toward balance-sheet-driven and investment-oriented participation.

Central Banks Sustain Strategic Gold Accumulation Despite Near-Term Variability

Globally, central banks continued to anchor gold demand at historically elevated levels. For the third consecutive year, aggregate purchases exceeded 1,000 metric tonnes, reinforcing bullion’s role as a strategic hedge amid geopolitical tension, currency volatility, and policy uncertainty.

In 2024, global central banks acquired 1,044.6 tonnes, followed by 415.1 tonnes in the first half of 2025. Between 2022 and 2024, annual net purchases more than doubled relative to historical norms, led predominantly by Asian central banks, including China, India, and Japan.

Quarterly data illustrates sustained institutional appetite. In Q3 2025, central banks added 220 tonnes, representing a 28% sequential increase and a 10% year-on-year rise. Cumulative purchases reached 634 tonnes in the first nine months of 2025, marginally lower than the 724 tonnes recorded over the same period in 2024, but still well above long-term averages.

RBI Slows Purchases but Gold’s Strategic Weight Rises Sharply

India’s central bank followed a markedly different trajectory in 2025. The Reserve Bank of India added just 4 tonnes of gold, the lowest annual addition in eight years, sharply down from approximately 73 tonnes in 2024. Between April and September 2025, purchases totaled just 0.6 tonnes, reflecting a tactical pause rather than a structural retreat.

Despite the slowdown, the RBI’s total gold holdings reached a record 880.2 tonnes by the end of 2025. More importantly, gold’s share in India’s foreign exchange reserves rose sharply—from around 10% to approximately 16% within a year—driven by the combination of heavy accumulation in 2024 and dramatic price appreciation in 2025.

This shift underscores a broader strategic recalibration: even without aggressive incremental buying, gold has assumed a materially larger role in India’s reserve architecture.

Investment Demand Emerges as the Dominant Growth Engine

Investment demand proved to be the most dynamic component of India’s gold market in 2025. In Q4 alone, investment demand rose 26% year-on-year to 96 tonnes, while its value more than doubled, surging 108% to Rs.1,20,700 crore.

Gold’s appeal as a portfolio diversifier intensified amid muted equity returns and heightened macro uncertainty. This trend was most visible in the explosive growth of gold exchange-traded funds.

Gold ETFs Record Unprecedented Inflows and Investor Expansion

Indian gold ETFs experienced a landmark year in 2025. December alone saw net inflows of Rs.116 billion, the highest monthly inflow on record, pushing cumulative ETF holdings up by 8.6 tonnes to an all-time high of 95 tonnes.

For the full year:

Net inflows reached Rs.430 billion, the highest ever recorded

Net demand totaled 37 tonnes, accounting for 5% of global gold ETF flows

Assets under management expanded to Rs.1,279 billion

India’s share of global gold ETF AUM increased from 1.9% to 2.5%

The investor base expanded rapidly. ETF folios grew 60% year-on-year, reaching 10.2 million accounts, with 3.8 million new accounts added in 2025. This surge reflects a broadening investor mindset, with gold increasingly viewed as a financial asset rather than a purely physical store of value.

Digital Gold and UPI Platforms Gain Momentum

Beyond ETFs, digital gold adoption accelerated meaningfully. Purchases conducted via Unified Payments Interface (UPI) platforms surged, with transaction values rising from Rs.8 billion in January 2025 to Rs.21 billion by December—nearly a threefold increase. Estimated annual digital gold purchases reached 13.5 tonnes, underscoring growing comfort with non-physical ownership formats.

Macro Forces and Policy Shifts Shape the Forward Outlook

Gold prices rose 67% during 2025, the strongest annual increase since 1979, with domestic prices reaching Rs.1,39,799 per 10 grams by early January 2026. This rally was fueled by a confluence of factors: elevated geopolitical risk, persistent policy uncertainty, sustained global ETF inflows, and safe-haven demand.

Currency dynamics amplified the impact domestically. The Indian rupee’s slide toward Rs.86–90 per US dollar materially increased landed bullion costs. At the same time, the Union Budget 2024’s reduction of gold import duties from 15% to 6% provided partial relief, supporting sentiment even as absolute prices climbed.

Looking ahead, Indian gold demand is expected to stabilize in the 600–700 tonne range in 2026, reflecting continued price sensitivity alongside structurally stronger investment participation.

Strategic Takeaway: A Financialized Gold Market Emerges

The data points to a decisive structural shift in India’s gold ecosystem. Physical jewelry demand is no longer the primary driver of growth. Instead, gold is increasingly being absorbed through financial channels—ETFs, digital platforms, and institutional reserves—as households and institutions reposition the metal within broader asset-allocation frameworks.

This evolution marks a turning point. Gold in India is transitioning from tradition-bound consumption toward strategic financial ownership, aligning domestic behavior more closely with global investment patterns.

Sources:
World Gold Council (WGC)
Reserve Bank of India (RBI)
Indian financial institutions and market data reports