How This Year’s Diwali Gold Buying Spree is Unique
As the Hindu festival of Diwali approaches, the jewelry markets, particularly in the bustling neighborhoods of India's capital, Delhi, are filled with throngs of shoppers. Despite soaring gold prices hitting over $1,440 for 10 grams, the love for gold among Indians remains undeterred.
Diwali and Dhanteras, another festival celebrated around the same time, are considered lucky times to invest in precious metals. Consequently, hundreds of thousands of Indians head to the markets to buy gold and silver coins, bars, and jewelry, hoping to bring in prosperity and good fortune.
High Prices, High Demand
The surging prices have induced a sense of FOMO (Fear Of Missing Out) among buyers, leading to an increased influx of customers in jewelry stores. The fear stems from the worry that prices might climb even higher. Despite the price hike, people are not completely refraining from buying gold. Rather, they're opting to buy smaller quantities.
With gold prices up by 60% and silver by 70%, jewelers are devising strategies to cater to customers with limited budgets. One approach is to design pieces that appear elaborate but contain less gold. For instance, a coin made of 250mg gold, selling for as low as $35, is now thinner but designed to appear as large as the heavier ones. There are also coins weighing a mere 25mg available in the market.
Changing Trends in Gold Purchase
High prices have also augmented the growing trend towards lighter jewelry, particularly among the younger generation who prefer pieces for daily wear rather than just for special occasions. Further, more customers are buying gold and silver for investment purposes rather than for ornamentation. This trend is reflected in bullion market data as well.
While gold jewelry still makes up the largest portion of India's overall gold demand, the percentage driven by investment - mainly bars and coins - has been on the rise. In fact, the proportion of gold bought as jewelry dropped to 64% in the second quarter of this year, down from 80% in the same period in 2023. On the contrary, investment demand rose from 19% to 35% in the same timeframe.
Investments in Digital Gold
Many investors are also turning to exchange-traded funds (ETFs) or digital gold, with September seeing record high inflows. ETF assets under management have surged by over 70% this year. Apart from retail demand, gold prices are also influenced significantly by India's central bank. The share of gold in its foreign exchange reserves rose from 9% to 14% in 2025.
The central bank has been actively buying gold to diversify its foreign exchange holdings, lessen its reliance on the dollar, and ensure stability during geopolitical turmoil.
The Future of Gold Demand
Going forward, retail demand for gold and silver is expected to remain strong, even with sky-high prices, as the festive and wedding seasons kick off. However, it is a setback for lower-income families who might struggle to buy gold. Demand is expected to remain steady in value terms, but volumes will likely decrease.
High prices have forced some families to rethink their purchases. Some are delaying their shopping in the hope that prices will drop. Despite these challenges, the love for gold in India remains steadfast, marking the unique gold-buying spree during Diwali.