Key Takeaways

• Gold prices surge to record highs, with narrowing domestic discounts signaling strong demand in India
• Investment in physical bars and coins drives festive season buying momentum
• Gold ETFs see robust inflows and minimal outflows, reflecting growing investor confidence
• RBI pauses gold reserve purchases, focusing on valuation gains
• August gold imports hit a nine-month peak, underscoring resilient seasonal demand

Outlook

As India enters the peak festive months of October through December, gold demand is set for a potential boost, fueled by sustained investment interest, wedding-related jewelry purchases, and increased consumer spending from recent GST reductions. However, soaring prices—and any further spikes—could cap overall volumes, creating a delicate balance between enthusiasm and restraint.

Gold’s Bullish Surge Gains Traction

Gold has reclaimed its upward momentum with vigor, rallying sharply in late August and accelerating into early September to smash all-time highs, delivering 40% year-to-date returns. Global spot prices climbed 4% in August and surged an additional 6.7% in the first half of September, driven by a weaker US dollar, heightened geopolitical tensions, and strong inflows into global gold ETFs. September’s rally was further fueled by bullish futures positions and sustained ETF demand, with lower US Treasury yields—spurred by expectations of a Fed rate cut—adding tailwinds.

In India, domestic prices have mirrored global trends, amplified by a 3% year-to-date rupee depreciation. By mid-September, local prices rose 7% month-to-date to INR 106,863 per 10 grams, pushing annual gains to 44%. Notably, domestic discounts to international benchmarks have narrowed significantly, briefly flipping to premiums in late August and mid-September—a shift from persistent discounts since December, signaling robust buyer interest.

Visualizing the Surge: Gold Price Momentum

Chart 1: Sharp Rally in Gold Prices
This line graph tracks end-of-month LBMA Gold Price PM in USD alongside domestic MCX spot movements up to September 15, 2025. It highlights a late-August breakout, early-September acceleration, 4% August global gain, and 6.7% early-September spike, underscoring 40% YTD progress.
Sources: Bloomberg, World Gold Council

Domestic Discounts on the Mend

Chart 2: Domestic Gold Price Discount Narrows
A bar chart showing NCDEX gold premiums/discounts versus international levels through mid-September 2025. It illustrates persistent discounts since December giving way to narrowing gaps, with brief premiums in late August and mid-September, reflecting heightened local demand.
Source: NCDEX, World Gold Council

Festive Demand Ignites, Led by Investment

With the festive season kicking off, India’s gold market is heating up, driven primarily by a surge in physical investment demand for bars and coins, according to trade reports and retailer insights. Investors are outpacing jewelry buyers, drawn by the price uptrend and expectations of further gains.

Jewelry demand, while present, is uneven. High-value, wedding-related purchases remain steady, but elevated prices have curbed everyday and discretionary buying, pushing consumers toward lower-carat options. Large retailers report rising footfalls, fueled by aggressive marketing and store expansions, while smaller shops face softer demand. Old-for-new jewelry exchanges are boosting sales values, even as volumes trail year-over-year due to higher prices.

Bullion dealers have ramped up purchases since early September, anticipating stronger festive demand and a lift from the GST cut effective September 22, post the 16-day Pitru Paksha period. The gold trade is buzzing with optimism for a strong festive season.

ETFs Surge with Inflows and Investor Confidence

India’s gold ETFs posted a stellar August, with INR 21.9 billion (US$250 million) in net inflows—up 74% month-on-month—marking the fourth consecutive month of gains and the second-highest inflow of 2025. Investors seeking safe-haven assets amid shaky equities and global risks drove this surge. Early September data suggests continued momentum, with strong inflows in the first two weeks.

Outflows dropped to a seven-month low of INR 1.5 billion (US$17 million), down from a yearly average of INR 7.5 billion, indicating investors are holding firm despite price gains. Assets under management hit a record INR 724 billion (US$8.3 billion), with holdings up 2.1 tonnes to 70 tonnes. Investor participation soared, with 164,000 new accounts added, bringing active folios to 8.03 million—a 24% increase since January. A new ETF, Angel One Gold ETF, launched in August, raising the total to 22 funds.

ETF Momentum in Focus

Chart 3: Inflows Gained Pace in August
This dual-axis chart plots monthly gold ETF flows in INR billion against total holdings in tonnes through end-August 2025. It highlights August’s INR 21.9 billion surge (74% m/m), the fourth straight positive month, and holdings climbing to 70 tonnes.
Sources: AMFI, ICRA Analytics, CMIE, World Gold Council

RBI Maintains Restraint

The Reserve Bank of India (RBI) paused gold purchases for the second consecutive month in August, with additions in only three of 2025’s first eight months, a sharp slowdown from 2024’s consistent buying. Cumulative purchases reached just 3.8 tonnes from January to August, compared to 45.4 tonnes in the same period last year.

Despite the slowdown, India’s gold reserves hit a record 880 tonnes, with a modest 4% volume increase but a 40% value surge due to soaring prices. Gold now accounts for 12.5% of India’s foreign exchange reserves, up from 9% a year ago, highlighting the impact of price appreciation on reserve strength.

Imports Reflect Resilient Demand

August gold imports soared to a nine-month high of US$5.2 billion, up 37% from July, marking two months of elevated inflows. Estimated volumes reached 60-65 tonnes, up from July’s 46 tonnes, reflecting strong seasonal demand despite high prices.

Imports on the Rise

Chart 4: Imports Rise to a Multi-Month High in August
A combined line-and-bar chart of monthly gold imports in tonnes and US$ billion, including estimates. It captures August’s US$5.2 billion (37% m/m) and 60-65 tonne volume peak, the second straight high-water mark.
Sources: Ministry of Commerce and Industry, CMIE, World Gold Council

Conclusion: A Golden Festive Horizon?

India’s gold market is firing on all cylinders as the festive season looms, with investment demand, ETF inflows, and robust imports painting a vibrant picture. While RBI’s cautious stance tempers reserve growth, the demand surge—bolstered by tax cuts and wedding season—sets the stage for a dynamic Q4. High prices remain a potential hurdle, but for now, India’s gold story is gleaming with promise. Investors and traders should keep a close eye on how this festive momentum plays out amid global uncertainties.

This analysis draws on market data and insights as of September 15, 2025. For more details, explore World Gold Council resources.

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