Global gold market shifts towards investment-led demand amid uncertainty, geopolitical tensions

India’s gold market is witnessing a shift towards investment-driven demand, even as high prices continue to weigh on jewellery consumption, a joint Assocham-Icra report has said.

Global gold jewellery consumption fell 15% in FY2025 and a further 17% in H1FY2026 amid rising prices, while investment demand for bars, coins and exchange-traded funds (ETFs) jumped 74% and 60%, respectively, on a year-on-year basis.

Central banks have remained significant buyers of gold in recent years, with annual purchases exceeding 1,000 tonnes between FY2023 and FY2025, supporting prices amid global economic uncertainty.

In India, gold jewellery demand declined by around 26% year-on-year in H1FY2026, although the overall impact was partly offset by a 15% rise in demand for bars and coins.

India has emerged as the world’s largest gold jewellery consumer, surpassing China, and accounted for about 30% of global demand in FY2025, supported by strong cultural demand linked to weddings and festivals.

Gold prices have risen sharply, up about 33% in FY2025 and over 50% so far in the current fiscal, driven by central bank buying, geopolitical tensions and depreciation of the rupee against the US dollar.

On the supply side, India continues to rely heavily on imports due to limited domestic mining, with imports accounting for around 85-88% of the total supply in recent years. Globally, gold mining remains the dominant source, contributing over 70% of total supply, with recycling accounting for the balance. Global mine production has remained relatively stable in recent years.

In India, domestic gold mining output is negligible, resulting in a high dependence on imports. However, gold recycling has gained some traction in recent years, partially supplementing supply.

Regulatory reforms have been instrumental in formalising India’s gold ecosystem. Policy measures, including a reduction in import duty and mandatory hallmarking of gold jewellery, have supported formalisation of the sector by improving transparency, traceability and consumer confidence. Mandatory hallmarking has also significantly improved purity assurance and recycling efficiency.

The implementation of India Good Delivery Standards (IGDS) for bullion has strengthened domestic refining, aligned Indian bars with global benchmarks and reduced dependence on imported refined gold.

Together, these measures are supporting India’s ambition to emerge as a more prominent player in global gold trade and price discovery.

The organised segment is estimated to account for around 40% of the gold jewellery market, with players expanding through franchise-led models and increasing presence in tier-2 and 3 cities.

The report also noted that recycling contributes about 10-15% of domestic gold supply, with higher prices encouraging exchange of old jewellery, although monetisation schemes have seen limited traction.

Going ahead, high prices may continue to weigh on jewellery demand in the near term, though rising investment demand, expansion of organised players and increasing financialisation are expected to support the sector’s medium-term growth.