Indian Gold Demand Stays Strong Despite Record Prices Ahead of Festive Season

India’s love affair with gold is legendary, deeply woven into the cultural and economic fabric of the nation. As the festive season approaches, a time when buying gold is considered auspicious, the precious metal’s demand in India is facing a unique test: record-high prices. Despite these soaring costs, the demand for gold remains remarkably resilient, fueled by a combination of strategic industry adaptations, compelling festive offers, and the enduring cultural significance of gold in Indian society.

The Price is High, But So is the Demand

Gold prices in India have reached unprecedented levels. As of late September 2025, 24-carat gold has crossed Rs 117,500 per 10 grams in Mumbai, while 22-carat gold is priced around Rs 105,000 [13]. These record-breaking prices represent a substantial year-on-year increase, with some reports indicating a 40% rise [9].

However, this hasn’t deterred Indian consumers. While there are expectations of a slight dip in overall volume, the value of gold purchases is expected to remain significantly higher than the previous year [3]. This resilience can be attributed to several factors:

Cultural Significance: Gold is deeply embedded in Indian culture, playing a vital role in weddings, festivals like Diwali and Dussehra, and other auspicious occasions [4, 5, 6]. It is considered a symbol of prosperity, wealth, and good fortune, making it a popular investment and gift [4].
Investment Hedge: Gold is also seen as a safe-haven asset, particularly during times of economic uncertainty [5, 7, 10]. It is considered a hedge against inflation and currency depreciation, making it an attractive investment option [5, 6, 22].
Strategic Industry Adaptations: Major jewelry retailers are proactively adapting to the high prices by offering attractive discounts, lighter jewelry options, and innovative rate protection plans [9, 14].

Industry Responds with Festive Offers and Innovation

Jewelers across India are pulling out all the stops to maintain consumer interest during the crucial festive season. Some of the strategies they are employing include:

Discounts on Making Charges: Retailers like Kalyan Jewellers are offering substantial discounts on making charges for wedding jewelry and other collections [9].
Discounts on Diamond Jewelry: Tanishq provides discounts on making charges and diamond jewelry, along with their signature no-deduction policy on old gold exchanges [9].
Free Gold Coins: CaratLane entices customers with free gold coins based on purchase values [9].
Lighter, Lower-Carat Jewelry: Brands like Aditya Birla Group’s Indriya are reporting a growing preference for lighter, lower-carat jewelry, offering discounts on making charges and rate protection plans [9].
Exchange Offers: Kalyan Jewellers and other retailers have exchange offers, allowing customers to bring in their old gold jewelry and upgrade to newer designs [14].
Monthly Installment Plans: Many consumers are opting for monthly installment plans offered by jewelers to make gold purchases more manageable [14].

These strategies aim to address consumer concerns about rising prices and encourage them to continue investing in gold during the festive season.

Market Dynamics: Shifting Consumer Behavior

While overall gold consumption may see a slight dip, there are interesting shifts in consumer behavior:

Increased Investment Demand: Data suggests that investment demand for gold is increasing, with gold ETFs witnessing significant inflows [9]. This indicates that consumers are increasingly viewing gold as a financial asset rather than just decorative jewelry.
Preference for Digital Gold and Gold Coins: Retailers have increased sales of digital gold and gold coins, with investment demand accounting for a significant portion of total demand [3].
Demand for Lighter Pieces: Consumers are opting for lighter, more affordable pieces of jewelry to stay within their budgets [2]. The market share of 18K gold jewelry has also increased, as it is more affordable than traditional 22K gold [3].

These trends suggest that consumers are adapting to the high prices by exploring alternative forms of gold investment and adjusting their purchasing habits.

Factors Influencing Gold Prices in India

Several factors influence gold prices in India, including:

Global Market Trends: Gold is a globally traded commodity, and its price is affected by economic conditions worldwide [5, 10]. Factors like the strength of the US dollar, central bank policies, and geopolitical events can all impact gold prices [5].
Inflation and Economic Stability: Gold is often considered a hedge against inflation, and its demand tends to increase during periods of economic uncertainty [5, 6, 7].
Rupee-Dollar Exchange Rate: Since India imports most of its gold, the value of the Indian rupee against the US dollar plays a crucial role in determining domestic gold prices [5].
Seasonal Demand and Cultural Factors: Certain times of the year, such as the festive and wedding seasons, see higher demand for gold, which pushes prices up [5, 6].
Government Policies and Import Duties: Government policies, such as import duties and the Goods and Services Tax (GST), can also impact gold prices [5, 13].
Interest Rates: Interest rates offered by banks can influence gold demand. When interest rates are low, people may prefer to invest in gold rather than keep their money in savings accounts [6, 7].
Reserve Bank of India (RBI) Policies: The RBI’s gold reserves and its policies on gold imports can also affect gold prices [6, 8, 20].

Impact on the Indian Economy

Gold plays a significant role in the Indian economy. India is one of the largest consumers of gold globally, and fluctuations in gold prices can impact various aspects of the economy, including:

Import Bills: Higher gold prices can lead to increased import bills, which can widen India’s trade deficit [3, 20].
Current Account Deficit: Increased gold imports can put pressure on India’s current account deficit [3, 13, 20].
Inflation: Rising gold prices can contribute to inflation [6, 7, 20].
Rupee Value: High gold prices and increased demand can put pressure on the Indian rupee [22].
Consumer Spending: Rising gold prices can impact consumer spending, as people may have to allocate a larger portion of their budget to gold purchases [20].

However, gold also supports the jewelry and technology industries, creating job opportunities [20]. It is also considered a safe haven asset, which can help stabilize the economy during times of uncertainty [5, 7, 10].

Investment Strategies for the Festive Season

For those looking to invest in gold during the festive season, here are some strategies to consider:

Physical Gold (Jewelry, Coins, Bars): Traditional option with cultural and emotional value [11, 19]. However, making charges and storage costs can reduce returns [11].
Digital Gold: Convenient and safe way to buy gold online in small amounts [11]. However, it is not regulated by SEBI, and there may be platform dependency [11].
Gold ETFs: Traded on stock exchanges and backed by physical gold [11, 17]. They offer transparent pricing and liquidity but require a Demat account [11].
Sovereign Gold Bonds (SGBs): Government-backed bonds that earn annual interest [11]. They are safe, have no storage hassle, and offer tax benefits, but have a lock-in period [11].
Gold Mutual Funds: Invest in Gold ETFs and offer diversification [19].

Smart Investment Tips:

Compare Prices: Gold rates vary across cities and jewelers, so compare prices before buying [11].
Invest Within Budget: Treat gold as an investment, not just a purchase [11].
Balance Your Portfolio: Allocate a portion of your investment portfolio to gold for diversification [11].
Leverage Festive Offers: Take advantage of discounts and reduced making charges offered during festivals [11].

Conclusion

Despite record-high prices, the demand for gold in India remains strong ahead of the festive season. This resilience is driven by the cultural significance of gold, its role as an investment hedge, and strategic adaptations by the jewelry industry. While consumer behavior is shifting, with a growing preference for digital gold, gold ETFs, and lighter jewelry pieces, the enduring allure of gold in Indian society is undeniable.

As you prepare for the festive season, consider these factors and make informed decisions about your gold investments. Whether you choose to buy physical gold, invest in digital gold, or opt for gold ETFs or SGBs, remember to align your investments with your financial goals and risk tolerance.