India’s gold market is witnessing a sharp decline in consumer demand as global prices of the precious metal surge to record highs in 2025. According to recent data from the World Gold Council and SBI Research, gold prices have risen by over 50% year-to-date, driven by persistent geopolitical tensions and a weakening US dollar. While this rally has significantly boosted the value of India’s official gold reserves, it has simultaneously curtailed retail demand, particularly for jewellery.
In the July–September quarter (Q3 2025), India’s overall gold demand fell by 16% year-on-year to 209.4 tonnes. Jewellery demand, which traditionally dominates the Indian gold market, dropped by a staggering 31% in volume. Despite this, the value of jewellery sales remained relatively flat at ₹1.14 lakh crore due to the steep rise in prices. The price of 24-carat gold reached ₹97,075 per 10 grams in September, up from ₹66,614 a year earlier.
Interestingly, while consumer demand for physical gold has weakened, investment demand has surged. Purchases of gold coins and bars rose by 20% in volume and 74% in value, reaching ₹88,970 crore. This shift reflects a growing preference for gold as a safe-haven asset amid global economic uncertainty.
The rally has also had significant fiscal implications. The government’s Sovereign Gold Bond (SGB) scheme, launched to reduce physical gold imports, has led to substantial capital losses. As of October 2025, outstanding SGBs stood at 125.3 tonnes. The redemption price for the 2017–18 Series IV tranche was recently set at ₹12,704, resulting in an absolute return of 325% for investors. However, this has translated into a notional capital loss of ₹93,284 crore for the government, excluding interest payments.
SBI Research notes that while the Reserve Bank of India’s gold holdings—now around 880 tonnes—have appreciated by $27 billion in FY26, the country remains heavily reliant on gold imports. The dual effect of rising prices and declining consumer demand presents a complex challenge for policymakers seeking to balance economic stability with cultural and investment-driven demand for gold.
