Editor’s Note
This article highlights the continued surge in gold prices, driven by a combination of currency dynamics and geopolitical factors. The data underscores a significant divergence between domestic and international returns, influenced heavily by local currency depreciation.
International gold prices extended their sharp rally beyond October, ending November up 4.5% and gaining a further 3.7% to US$4,347/oz by 12 December, taking year-to-date returns to 67%. Domestic gold prices mirrored this trajectory but outperformed, rising 73% year-to-date, aided by a 5.6% depreciation in the Indian Rupee (INR). The World Gold Council’s Gold Return Attribution Model (GRAM) suggests that the rally has been supported by a weakening US dollar, persisting geopolitical tensions, and gold ETF inflows.
Discounts on domestic gold prices have widened significantly, increasing from around US$11/oz at the start of November to nearly US$30/oz as of 12 December, partly reflecting a slowdown in jewellery demand.
Gold demand in India continues to diverge: sustained strength in investment demand contrasts with weakness in the jewellery segment. Feedback from industry stakeholders, mainly manufacturers and retailers, indicates that gold jewellery volumes are lower year-on-year, despite the wedding season, as higher prices and affordability weigh on consumption.
Price volatility is further constraining discretionary and everyday jewellery purchases. This divergence is also evident across the retail landscape. Large and medium-sized jewellers continue to report relatively healthy sales, supported by higher ticket prices and need-based wedding purchases, whereas small and standalone jewellers are under pressure.
Meanwhile, demand for gold investment products, particularly bars and coins, remains strong. The preference towards investment-focused buying is reflected in the volume of gold imports, which rose sharply to 340 tonnes between July and October, compared with 204 tonnes between January and June, underscoring the resilience of investment-led demand.
Inflows into Indian gold ETFs remained strong in November, although at a slower pace than in the preceding two months. Net inflows totalled INR 37.4 billion (US$421 million), about half of the previous month but still comfortably above the average monthly inflows of INR 27.6 billion (US$315 million) during the first 10 months of the year. Gold holdings rose by nearly 3 tonnes during the month, taking cumulative holdings to 86.4 tonnes, broadly in line with estimates.
Over the first 11 months of 2025, cumulative net inflows reached a record INR 313 billion (US$3.6 billion), while holdings rose by 28.6 tonnes – the highest annual addition on record and nearly double that of the previous year. Investor participation has expanded significantly, with 3.4 million new accounts (folios) added between January and November, representing a 152% year-on-year increase and taking total accounts to 9.8 million.
Assets under management (AUM) of gold ETFs have grown to INR 1,105 billion (US$12.4 billion), lifting their share of total mutual fund AUM from 0.8% at the beginning of the year to 1.4%. Two new gold ETFs were launched in December, taking the total number of gold ETFs in India to 25. Seven gold ETFs have been launched so far in 2025, underscoring the growing depth of the segment.
The Reserve Bank of India’s (RBI) gold accumulation has moderated sharply this year, marking a clear departure from the aggressive buying seen in 2024. Gold has been purchased during just four months this year, with no additions since September, resulting in net purchases of just 4 tonnes compared with 72.6 tonnes last year. Nevertheless, the central bank’s gold holdings stand at a record 880.2 tonnes.
Despite the slowdown in buying, gold’s share in India’s foreign exchange reserves has risen from 10% to 15.6% year-on-year, largely due to higher gold prices and the growing valuation impact of gold within the reserve’s portfolio.
November saw a sharp drop in gold imports as post-festive demand slowed.
The inauspicious period from mid-December to mid-January is likely to weigh on jewellery demand, while investment interest is expected to be sustained.