Investment demand for gold in India stayed robust last month, even as post-wedding season jewelry purchases softened due to high prices. Meanwhile, many Indians are capitalizing on rising prices by monetizing their gold holdings.
India is the world’s second-largest gold market, trailing only China. Domestic gold prices mirrored global trends, rising about 1% in May and gaining an additional 4% in the first two weeks of June. Year-to-date, gold is up over 30% in rupee terms.
Jewelry Demand Dips as Investors Shift Focus
The World Gold Council described Indian gold jewelry demand as “underwhelming” following the wedding season, which traditionally brings seasonal fluctuations in buying patterns. Although moderate price declines in May increased store visits, purchases remained subdued and mostly “need-based.”
Anecdotal evidence indicates many Indians are monetizing existing gold jewelry by exchanging old pieces for new, liquidating their holdings, or leveraging them as collateral for loans. The Reserve Bank of India recently relaxed gold loan regulations, expected to boost lending backed by gold. Commercial bank gold loans surged nearly 120% year-on-year by the end of April.
Physical Gold Investment and ETFs See Growth
Despite weaker jewelry sales, investment demand for physical gold remained firm. Sales of coins and bars were buoyed by rising prices and expectations of further gains. Notably, demand for small coins weighing less than 10 grams has been exceptionally strong. Coins and bars account for roughly 30% of Indian consumer gold demand.
Gold also flowed back into Indian-based exchange-traded funds (ETFs) in May after two months of outflows. Assets under management in Indian ETFs increased by around $34 million with the addition of 0.2 tonnes of gold. Total holdings now stand at 64.65 tonnes. Investor participation continues to expand, with 220,000 new ETF accounts opened recently and a 38% growth in the number of folios so far this year. The World Gold Council views this as evidence of growing interest in gold as a financial asset.
Cultural Significance and Wealth Preservation
Gold remains deeply embedded in Indian culture, tied closely to marriage ceremonies, religious rituals, and festivals. While in many Western countries gold is viewed primarily as a luxury, in India it is a vital store of wealth—particularly in rural areas where much of the population operates outside formal tax systems.
A 2018 ICE360 survey found that 87% of Indian households own some form of gold, and even over 75% of families in the lowest income brackets had purchased gold in the past five years. This broad ownership underlines gold’s role as a financial lifeline.
During the COVID-19 pandemic, when banks tightened credit and lockdowns affected incomes, many Indians used gold as collateral for loans or sold jewelry outright to cope with economic hardships.
Rising Imports Reflect Growing Demand
Gold imports into India increased by approximately 32% year-on-year in May, according to data from Metals Focus, reflecting sustained demand despite price pressures.
