Introduction: Gold Prices Hit Record Highs
Gold prices have been on a relentless upward trend in recent weeks, raising concerns among jewellers and consumers alike ahead of India’s crucial festive season. On Thursday, gold futures on the Multi Commodity Exchange (MCX) fell by ₹226 to settle at ₹1,08,760 per 10 grams, reflecting weakness in global markets. Despite the dip, prices remain near record highs, hovering close to ₹1,09,500 per 10 grams, making gold jewellery increasingly unaffordable for many households.
The surge in prices has been supported by factors such as central bank buying, geopolitical tensions, and expectations of U.S. Federal Reserve rate cuts, but it has also dampened consumer appetite for jewellery purchases.
WGC Report: India’s Gold Demand May Hit Five-Year Low
According to a latest World Gold Council (WGC) report, India’s gold demand is projected to drop sharply in 2025, possibly hitting its lowest level since 2020.
- India, the world’s second-largest consumer of gold, could see demand fall to 600–700 metric tons this year
- This would mark a significant drop from 802.8 tons recorded in 2024
- The decline is attributed mainly to soaring gold prices discouraging jewellery demand, even as investment demand shows a modest rise
Sachin Jain, CEO of WGC’s India operations, told Reuters that while cultural affinity for gold remains strong, price-sensitive rural and urban buyers are delaying or reducing purchases, particularly for weddings and festivals.
Price Trends: Global and Domestic Market Insights
Gold prices have been swinging between gains and losses as investors weigh economic data and geopolitical risks.
- MCX October gold futures: Down ₹226 or 0.21% to ₹1,08,760 per 10 grams
- Support levels: ₹1,08,340–₹1,07,740
- Resistance levels: ₹1,09,450–₹1,09,950
- Silver support: ₹1,23,550–₹1,22,750
- Silver resistance: ₹1,25,950–₹1,26,740
On the international market, gold has support at $3,615–$3,590 and resistance at $3,660–$3,675, while silver is trading in the $40.90–$41.65 range.
Rahul Kalantri, VP of Mehta Equities, noted that bullion traded with a steady bias, supported by cooling U.S. inflation and PPI data, but strong momentum is lacking as markets await U.S. CPI data for further direction.
Festive Season Outlook: Jewellers Brace for Sluggish Demand
India’s gold jewellery industry is bracing for muted demand during the upcoming festive season despite traditionally strong cultural sentiment.
- Prithviraj Kothari, MD of Riddi Siddhi Bullions Ltd. (RSBL), said that record prices of around ₹1,09,500 per 10 grams are discouraging buyers
- Many consumers are shifting to lightweight jewellery or gold-plated ornaments to manage costs
- Several retailers are offering discounts on making charges, EMI schemes, and exchange offers to attract customers
Jewellery retailers anticipate that urban buyers may delay purchases in anticipation of a price correction, while rural demand could be severely affected by high prices and weak agricultural incomes.
Why Prices Are Rising: Key Drivers Behind the Gold Rally
Several factors are driving the rally in gold prices and contributing to subdued jewellery demand:
- Central banks’ strong gold purchases, especially in emerging markets
- Geopolitical tensions in Eastern Europe and the Middle East pushing safe-haven demand
- Expectations of U.S. Federal Reserve rate cuts, which make gold more attractive as a non-yielding asset
- Weakness in the U.S. dollar and falling bond yields supporting bullion prices
- Inflation hedging as investors seek stability in uncertain global markets
Consumer Sentiment: Buying Patterns Are Changing
The surge in prices has changed how Indian consumers are buying gold:
- Lower-weight jewellery purchases are on the rise, as consumers prefer smaller pieces
- Gold coins and bars are witnessing a slight uptick as an investment hedge
- Young urban buyers are shifting to diamond or silver jewellery as a more affordable alternative
- Wedding jewellery budgets are being revised downwards due to cost concerns
Retailers report that footfalls have declined in showrooms, and many buyers are postponing purchases until after the festive season, hoping for price corrections.
Impact on the Jewellery Industry
The Indian jewellery industry, which relies heavily on festive and wedding season sales, faces multiple challenges due to soaring gold prices:
- Reduced inventory stocking by retailers fearing price volatility
- Increased operational costs for manufacturers and artisans
- Pressure on profit margins as retailers offer discounts to stimulate sales
- Risk of job losses in the unorganised jewellery sector if demand stays weak
Industry experts warn that if high prices persist, the sector could see consolidation, with smaller players exiting the market.
Investment Demand May Offer Limited Cushion
While jewellery demand is weakening, investment demand is showing slight improvement, especially among high-net-worth individuals.
- Rising prices are attracting short-term investors and traders
- Gold ETFs and sovereign gold bonds have seen increased inflows
- However, investment demand remains too small to offset the decline in jewellery demand, which traditionally makes up the bulk of gold consumption in India
Conclusion: Caution Ahead of Festive Season
As India approaches its crucial festive and wedding season, soaring gold prices are casting a shadow over jewellery demand. Despite cultural and traditional significance, buyers are becoming increasingly price-conscious.
Industry experts expect that unless prices cool down, jewellery sales could see one of their weakest festive performances in recent years, impacting not just retailers but also artisans and small businesses dependent on the gold trade.
The coming months will be crucial in determining whether a price correction or aggressive retail offers can revive demand—or if 2025 will mark a five-year low for India’s gold consumption, as projected by the World Gold Council.
