Editor’s Note
The gold market is experiencing a powerful rally driven by a confluence of factors. As this analysis highlights, surging investment demand—evidenced by record ETF inflows—is combining with robust seasonal and jewellery buying to push prices higher. This momentum is reflected in strong imports and resilient sales for major jewellers, underscoring gold’s enduring appeal.
- Gold price rally intensifies and domestic premium climbs.
- The festive season starts strongly, powered by investment demand and jewellery sales.
- September sees record inflows into gold ETFs and the momentum carries forward.
- Listed jewellers report strong quarterly revenue gains despite the high gold price and base effect.
- Gold imports hit a 10-month high in August, supported by seasonal buying and investment demand.
Expectations for a strong festive season remain high across the gold trade, driven by continued demand for investment products and wedding jewellery, despite challenges in the broader jewellery market amidst a rising gold price. Increased disposable income for consumers – following GST cuts and the prevailing low inflation environment – may give gold a boost.
Gold continues its extraordinary price rally, having reached 48 all-time highs this year. Geopolitical tensions, strong investment demand, dollar weakness, financial market risk and expectations of dovish Fed policy lifted international prices by 11.6% in September and by an additional 7.9% in the first two weeks of October, pushing past the US$4,000/oz milestone. Notably, the surge from $3,500 to $4,000 occurred in just 36 days, a stark contrast to the previous $500/oz increments, which took over three years on average. International gold prices have surged by 58% year-to-date, marking the largest increase in 45 years. Domestically, gold prices have mirrored this upward trend, rising 66% year-to-date, with gains further amplified by weakness in the Indian rupee.
The festive season has begun on a positive note, with market feedback and anecdotal evidence indicating healthy demand for both physical investment products and jewellery. The record rally in the gold price has drawn investor attention and fuelled sustained interest in physical gold. As a result, the share of investment demand within overall domestic gold consumption is on the rise.
High prices are prompting consumers to opt for lighter-weight, lower-carat pieces, affecting overall retail volumes. While retailers’ revenues may benefit from a boost in jewellery sales, overall volume demand is bound to decline due to affordability constraints from high gold prices.
Despite the high base effect – caused by the July 2024 customs duty cut – and the current record-high gold prices (up ~43% year-on-year), listed jewellery retailers delivered a strong performance in the July-September quarter, with revenue growth ranging from 6.5% to 63%, according to their quarterly business updates. The early onset of the festive season (September vs. October last year) and strong wedding demand helped to partially offset the impact of last year’s high base. Targeted marketing campaigns, promotional initiatives, and customer-centric purchase schemes – such as old gold exchange offers, lightweight options and curated product launches – further supported consumer momentum. Retailers reported a notable uptick in demand for lighter, lower-carat jewellery as consumers adapted to higher prices. Meanwhile old gold exchange programs remained a significant sales driver across retailers.
Digital and e-commerce channels also saw significant traction, with some retailers reporting a year-on-year doubling of online revenue. These large retailers remain upbeat about the current quarter, which is traditionally the strongest as it is driven by key festivals and peak wedding season demand.
Mirroring the global trend, Indian gold ETFs witnessed their largest-ever monthly net inflows in September, totalling INR83.6bn (US$947mn), a 282% increase month-on-month. Gold demand increased by 7.4 tonnes, closely aligned with our earlier estimate.
