RISING gold prices are driving Indian investors to purchase bars and coins in record numbers, with investment demand surging above £7.7 billion in the September quarter despite soaring prices dampening overall consumption, the World Gold Council has said.
Investment demand in the world's second-largest gold consumer jumped 20 per cent by volume year-on-year in the July-September period to 91.6 tonnes, while the value soared 74 per cent to £7.7 billion, the industry body reported on Thursday (30).
"This highlights a deepening strategic commitment among Indian consumers to gold as a long-term store of value," said Sachin Jain, the World Gold Council's regional chief executive for India.
The surge came even as overall gold consumption fell 16 per cent to 209.4 tonnes, with jewellery demand slumping 31 per cent to 117.7 tonnes due to record-high prices. However, the total value of demand rose 23 per cent to £15.5bn, reflecting sharply higher gold prices.
Local gold prices hit a record Rs 132,294 (£1,137) per 10 grams earlier this month and have surged 56 per cent so far in 2025 after a 21 per cent rise last year. The average gold price in India during the quarter stood at Rs 97,074.9 (£830) per 10 grams, up 46 per cent from a year earlier.
Investment demand now accounts for 40 per cent of total gold consumption in the first nine months of 2025, the highest proportion on record, the council said.
Gold has become a mainstream asset as investors diversify their holdings and increase allocations, even amongst those with little prior exposure, Jain explained. "We believe investors' interest in gold will continue and grow in the coming quarters," he added.
Physically backed gold exchange-traded funds are also gaining popularity amid the rally. Gold ETFs drew record monthly inflows of Rs 83.63bn (£719 million) in September, according to data compiled by the Association of Mutual Funds in India.
The value of jewellery purchases remained relatively flat at around £8.7bn as buyers adjusted to elevated price levels, though volumes dropped significantly.
Gold imports tumbled 37 per cent to 194.6 tonnes from 308.2 tonnes, while recycling fell seven per cent to 21.8 tonnes. Jain said the import figures reflected last year's surge following a historic duty reduction announced in the July 2024 budget, which made the year-earlier quarter an exceptionally strong comparison base.
Despite the volume decline, Jain remained optimistic about demand during the crucial festive and wedding season, citing early signs from retailers and strong sales in October during Diwali.
"There is a 16 per cent drop in volume but there is a 23 per cent historic rise in value. We cannot ignore that," Jain said. "Indian consumers are catching up with the rise in per capita income and disposable income."
He noted that many consumers brought forward their wedding purchases as prices climbed in recent months, providing confidence for a strong fourth quarter. Demand in the December quarter is expected to exceed that of the September quarter, supported by festivals and the wedding season.
However, despite this seasonal recovery, total gold demand in 2025 could range between 600 and 700 tonnes, the lowest since 2020 and down from last year's 802.8 tonnes, Jain said. The council expects full-year demand towards the higher end of that range after demand of 462.4 tonnes in the first nine months.
India's decline contrasted with global trends, where gold demand rose to 1,313 tonnes in the third quarter, the highest on record. The global surge was driven primarily by central bank purchases and investment demand, with the National Bank of Poland remaining the largest buyer amongst central banks.
Jain attributed the continued strength in gold prices to geopolitical uncertainties, potential trade wars and countries diversifying their dollar reserves into gold, factors that are expected to support prices and demand momentum going forward.
(Agencies)
