In the midst of high jewellery prices, the retail jewellery market records subdued demand. Despite this, investment in gold continues to remain strong in the upcoming terms as per the report of the World Gold Council (WGC).

WGC Report

In the latest report of WGC stated that people need to make their statutory payments and tax-saving investment at the end of the financial year 2025. It will lead to contraction in discretionary spending which in turn slowdown demand for jewellery. Though, if the prices of gold stay stable then the demand for jewellery can be boosted in the financial year 2026.

Performance of Gold in  CY2025

In the month of November to December recorded a contraction of 6 percent. Coming to the year 2025, the gold prices recorded a turning point as the prices not only rallied but also hit new highest records. 

In the year 2025, the LBMA gold price surged to $2,938 per ounce compared to $2,86 per ounce which accounts to growth of 10 percent. In India, domestic prices are increasing in line with the international gold price trends. It has surged to 14 percent which accounts to around Rs. 86,831 per 10 grams. The reason for the rally is also partially due to depreciation of Indian Rupee against US Dollar by around 1.1 percent year-to-date.

Other factors contributing to the rally of gold prices are inflation level, expansion in investment flows, and growing geopolitical tension in the world.

Impact of the gold prices on the retail market

Since the start of the year 2025, the gold prices continue to record new all-time highs in the market. It has adversely impacted the demand in the retail gold jewellery market. The demand in the year 2025 was also affected by uncertainty pertaining to the announcement of the Budget 2025. 

In the month of January, 2025, the gold demand contracted in the retail market and continued in the month of February as well. This situation persisted even after the end of the inauspicious period in the Hindu Calendar and in the post Union budget. The purchases during the wedding season are usually high but it is recorded to remain low.  The reason for this is many consumers have already bought gold in the month of November, 2024 when gold prices were low. In the current scenario, people are exchanging their old gold with new gold jewellery rather than buying a new one.

Further, many consumers are selling their old golds to get profits in this situation of high gold price trends.

Impact on jewellery retailers

In the midst of subdued gold jewellery demand, many retailers are not ready to restock. The reason for this is difficulty in fulfilling payment terms and conditions with the jewellery manufacturers. Overall, it has led to liquidity squeeze in the industry. 

Gap between domestic and international gold prices

The domestic market in India is facing the issue of slowdown in gold jewellery demand. Its effect is clearly observed in the price gap between domestic and international prices. Following the month of December, the price gap between domestic and international prices is increasing. It was earlier US$ 3 per ounce in December and now it is US$ 23 per ounce. 

Despite the moderate demand for jewellery in the market, people are keen to invest in gold coins and bars. Investors project further rise in the gold price and this is the reason why they continue to invest in these investment products. 

Performance of ETFs

In the month of January 2025, Indian gold ETFs recorded growing preference by investors. As per the data of Association of Mutual Funds in India (AMFI), the gold ETFs registered net inflow of about INR 37.5 billion ( 435 million US dollars) in the month of January. It is a major hike compared to an average inflow of about INR 9.4 billion (112 million US dollars) in the last 12 months. The total assets under management (AUM)  of gold ETFs surged by 15 percent which accounts to INR 51.8 billion (6 billion US dollars) compared to the AUM in the last month. Further,  4.6 tonnes of gold were added in the overall holdings leading to total holdings of 62.4 tonnes.

In the month of January, many investors redirected their free cash flow by investing in Gold ETFs. The reason for this is to diversify their investment portfolios in the midst of growing domestic and international uncertainty. One of the reasons for this is subdued performance of the equity market led many investors to prefer gold ETFs as a safer investment option.

In the month of February, a new gold ETF product was launched known as 360 ONE Gold ETF. It led to 19 gold ETFs in India, indicating a robust growth in this segment.

The image added is for representation purposes only