Gold prices were flat in Asian trading on Wednesday as investors refrained from placing big bets ahead of the U.S. Federal Reserve’s policy decision while keeping a close eye on developments surrounding the Israeli-Iranian conflict.
Anindito Mukherjee | Bloomberg | Getty Images
The narrow streets of Zaveri Bazaar, one of the oldest jewelry markets in India’s financial capital Mumbai, were even busier this Diwali as crowds thronged to buy gold on the auspicious first day of the festival of lights.
But there was a twist.
Most people at the market were there to buy gold coins or bars – not jewelry – Mahavir Kothari, a wholesaler of precious metals in Zaveri Bazaar, told CNBC.
Leading gem and jewelry trading organizations in India told CNBC that more than 40 tons of gold were sold in the country on October 19, the first day of Diwali.
According to the India Bullion and Jewelers Association (IBJA) and the All India Gem and Jewelery Domestic Council (GJC), around Rs700 billion ($8 billion) to Rs1 trillion ($11 billion) worth of gold was sold during the five-day festival that ended on Thursday.
Ajay Chawla, CEO of one of India’s largest jewelry chains, Tanishq, reportedly warned that his company could run out of gold coins and bars due to demand during the festive season.
A few years ago, only one in 10 customers would have chosen a coin or gold bar, said Surendra Mehta, national secretary at IBJA, but that is slowly changing. He added that his trade association estimates that sales of jewelry this festive season have declined by about 30% compared to last year.
Indians’ enthusiasm for buying gold for investment stems from their search for returns. Gold prices had risen 66% this year through mid-October before experiencing a sharp decline – still at 55% on Monday. Earlier this month, gold prices broke $4,000 an ounce, with some industry experts predicting the yellow metal will hit $5,000 in 2026.
According to data from the World Gold Council, India is the second largest buyer of gold after China. This shows that the country has been a consistent buyer for years, driven by the traditional demand for gold during the festive season (October) and wedding season (October to mid-January and April to May).
Gold jewelry in a shop in Kolkata, India.
Sonali buddy Chaudhury | Photo only | Getty Images
As global central banks increase their purchases of gold, fueling a rise in prices, the yellow metal is increasingly attracting retail investors who fear missing out on the boom.
Goldman Sachs said in a Sept. 30 report that central banks, particularly in emerging markets, have increased their gold purchases about five-fold since 2022, when Russia’s foreign reserves were frozen after its invasion of Ukraine.
“We view this as a structural shift in reserve management behavior and do not expect a near-term reversal,” the report said.
These sharp increases in gold prices are prompting Indians to view gold not just as a consumer product but as an important investment asset, experts said.
Earlier, when gold demand was largely driven by consumption and jewelry prices were rising, consumers would have curbed their spending, said Anindya Banerjee, head of commodities and foreign exchange markets at Kotak Securities. But the elevated prices have not dampened the overall demand for gold this festive season.
Rajesh Rokde, chairman of GJC, said sales in terms of volume on all five days of Diwali were only about 5% lower compared to last year despite significantly higher prices.
Gold is currently trading at $4,073 an ounce.
“Indian household wealth held in gold is estimated at $3.8 trillion, or 88.8% of GDP,” Morgan Stanley said in an Oct. 9 report. “This results in a positive wealth effect, even as favorable macro stability ensures that gold demand flows remain within a certain range,” he added.
Gold is a good hedge against falling rupees and any weakness in Indian stock markets, said Mukesh Jindal, senior partner at asset management firm Alpha Capital, which manages more than 100 billion rupees of assets for family offices and high-net-worth individuals in India.
Investments include purchasing gold bars, coins, exchange-traded funds, and even digital gold. According to the Association of Mutual Funds in India, inflows into gold ETFs rose more than six times (Rs 83.63 billion) in September compared to a year ago.
Gold’s rally is likely to continue as central banks around the world remain net buyers of the metal month after month, Jindal said, adding that he has advised clients to invest 5% to 10% of their portfolio in gold. That’s still conservative compared to Bridgewater Associates founder and billionaire Ray Dalio, who earlier this month advised investing up to 15% of his portfolio in gold.
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