Notwithstanding lower consumption trends, spending on gold jewellery jumped nine per cent to USD 144 billion in FY24. This meant that people were paying much more for the same piece of gold or for lower carat yellow metal.
American investor and gold bull, Jim Rogers famously said that – “Unlike stocks, bonds, or real estate, gold does not depend on the performance of an economy to retain its value. It thrives in uncertainty, making it the ultimate safe haven for investors seeking stability in a volatile world.” While these words may sound prophetic, it has withstood the test of times and will hold true going ahead.
Gold is not just gaining on the current uncertainties; it is thriving on it. This week gold touched a new milestone of USD 3,000 per troy ounce, a target that was reserved by pundits for the end of 2025.
Its appeal is only growing by the day as central banks across the world are swelling their gold reserves. The yellow metal’s only competition is with the US dollar which is the world’s reserve currency because of the economic clout that the US has. But over the years, countries have realised that too much dependence on the USD jeopardises their sovereignty and it can be used as a handle against nations by the most powerful country.
This has forced global economies to go hammer and tongs on gold. Big institutional investors are also buying gold in hordes and since digital gold is easy to buy, retail investments have also been coming in the form of systematic investment plans (SIPs).
Food for thought
Gold’s unprecedented rise in the last six years is noteworthy. The uptick has been sharper back home versus internationally, because a falling rupee has increased the cost of imports, making gold even dearer in India.
With an exception of 2021 when the yellow metal prices fell by 4 per cent, it has risen in double-digits in the domestic markets in each year since 2019. In another word, its returns were 25 per cent (2019), 28 per cent (2020, the Covid year), 14 per cent (2022), 15 per cent (2023) and 21 per cent (2024). In 2025, so far, domestic gold has risen by over 14 per cent or by Rs 11,000 per 10 grams.
Gold’s consumption has been a direct casualty of the growing bullion (gold and silver) prices. According to a data released by the World Gold Council (WGC), annual consumption of gold jewellery has dropped 11 per cent to 1,877 tonne in financial year 2024. This is because consumers could only afford to buy in lower quantities, this report outlined. People are buying lower carat gold and jewellery items as affordability has become an issue.
Notwithstanding lower consumption trends, spending on gold jewellery jumped 9 per cent to USD 144 billion in FY24. This means that people are paying much more for same piece of gold or for lower carat gold.
Buying of gold in India whether in the form of jewellery, bars or coins goes beyond investments, it is a way of life and Indians prefer buying it during festivals like Akshaya Tritiya and around Diwali. The larger trend has been one of purchasing gold with carats of 16-20.
The uptick in gold prices in 2025 is a cause of worry because the rates are not just rising, they are running. Gold’s valuation remains a concern as the rally has been anything but natural. There is a fear that what if the prices correct in months from now, buying it at current levels could be a loss-making proposition.
Let us understand the reasons for the ever-rising shine of gold.
Several factors have contributed to this surge, including geopolitical tensions, economic instability, inflationary pressures, central bank policies, and fluctuating currency values.
1. Economic uncertainty and inflation
One of the primary drivers of the increase in gold prices is the ongoing global economic uncertainty. The world economy has faced numerous challenges recently, from slowing growth in major economies like the US and China to supply chain disruptions caused by geopolitical conflicts. Additionally, persistent inflation has eroded purchasing power, prompting investors to seek refuge in gold, which is historically seen as a hedge against inflation.
2. Central bank policies and interest rates
Central banks worldwide have taken aggressive measures to combat inflation, including fluctuating interest rates. However, despite tightening monetary policies, inflation remains stubbornly high, leading to increased demand for gold. Many central banks, particularly in emerging markets, have also been increasing their gold reserves, further pushing up prices.
3. Geopolitical tensions
Conflicts in Eastern Europe, trade disputes between major economies, and rising geopolitical tensions in the Middle East have fuelled market volatility. Investors tend to shift towards gold in times of geopolitical instability, considering it a safer investment compared to stocks and currencies. This shift has led to increased demand and higher prices for the precious metal.
4. Sharp decline in global currencies
The depreciation of major global currencies, including the US dollar, has contributed to the rise in gold prices. Since gold is priced in dollars, a weaker dollar makes gold more attractive to investors holding other currencies. This has driven international demand and led to an overall increase in gold prices.
5. Mining costs and supply chain challenges
The cost of mining and production of gold have risen due to inflation, higher energy prices, and labour shortages. Supply chain disruptions have led to delays in gold refining and distribution, reducing the overall supply and adding upward pressure on prices.
Impact on the physical gold
The jewellery industry is one of the largest consumers of gold, and the soaring prices in 2025 have had significant repercussions across the sector. From manufacturers to retailers and consumers, each segment of the industry has been affected differently.
In the 2024 budget, the Union Finance Minister of India had cut customs duty on gold prices to enhance domestic value edition. But that has had no deterrence in the way gold prices have moved owing to the weakness in rupee versus the USD.
a). Declining consumer demand
With gold prices reaching record highs, many consumers have cut back on their jewellery purchases. Traditional buyers, especially in markets like India and China, where gold jewellery plays a crucial role in weddings and festivals, are either postponing their purchases or opting for lighter-weight jewellery to manage costs. This has led to a decline in overall jewellery demand, impacting retailers and manufacturers alike.
b). Shift in consumer preferences
As gold jewellery becomes more expensive, consumers are exploring alternatives such as silver jewellery, platinum, and imitation gold ornaments. This shift in preference is forcing jewellery brands to diversify their product lines and offer more affordable options. Some brands are also promoting lower-karat gold jewellery, which contains less pure gold and is priced more attractively.
c). Impact on jewellery manufacturers and retailers
Jewellery manufacturers and retailers are facing multiple challenges due to the rising gold prices. Higher input costs are cutting their profit margins while volatile prices make it difficult to maintain consistent pricing strategies.
Retailers are also witnessing a slowdown in foot falls as customers are delay purchases for occasions. This is affecting overall sales volumes.
People are opting for recycling of gold jewellery or exchange programmes in lieu of old jewellery. Recycled gold has become a significant source of raw material for the industry, reducing dependence on fresh gold imports.
d). Shifting paradigm
It is easier to buy digital gold because one can buy as low as a gram and via systematic investment plans. Gold ETFs or mutual funds are becoming popular options for people to move towards gold.
The jewellery industry has been implementing various strategies to adapt to the changing market dynamics. It has been bringing in innovations by creating lightweight and trendy designs that require less gold but still appeal to modern consumers. They have introduced flexible payment plans offering instalments-based payment schemes. There is an omnichannel sales approach where online sales and digital showrooms are gaining traction, allowing consumers to browse and purchase jewellery from the comfort of their homes.
Moreover, there is strategic sourcing at play where many jewellers are securing long-term gold procurement deals to manage costs and reduce volatility in pricing.
Looking ahead, the future of gold prices will depend on macroeconomic factors, central bank policies, and geopolitical stability. While the jewellery industry is currently facing challenges, its ability to adapt and innovate will determine how it weathers this period of high gold prices. For consumers, the decision to buy gold jewellery remains a balancing act between affordability and investment potential, shaping purchasing trends in the years to come.
