India's Golden Dilemma: Navigating Seasonal Trends and Controversies
Gold's Seasonal Strength in India:
The Indian gold market is experiencing a fascinating phase, with prices softening from record highs but still attracting robust demand. Here's a comprehensive update:
Key Insights:
- Gold prices have retreated slightly but remain well-supported, indicating a healthy market.
- Domestic prices slipped into a discount, yet demand surged during the festive period, fueled by investment buying.
- Gold ETFs witnessed exceptional momentum in October, attracting record inflows and new investors.
- Gold imports soared in October, defying the price rally, suggesting strong underlying demand.
Looking Forward:
- The upcoming wedding season (November-March) is expected to boost jewellery demand, given the high number of anticipated weddings.
- Investment interest in gold is likely to remain strong, as bullish sentiment prevails.
Price Trends:
International gold prices soared in October, reaching an impressive 50th record high. Despite a 7% retreat from the peak, prices ended October 5% higher at US$4,011.5/oz. This positive momentum continued into November, with a nearly 3% increase as of November 19, resulting in a remarkable 58% year-to-date gain.
Chart 1: International and Domestic Gold Price Trends
Factors Influencing Prices:
Our Gold Return Attribution Model (GRAM) attributes the recent price movements to geopolitical risks, higher implied volatility, a stronger US dollar, momentum, and shifting interest-rate expectations. These factors have kept prices buoyant.
Domestic Market Dynamics:
Indian domestic gold prices have mirrored the international trend, delivering even stronger returns of 63% year-to-date. This outperformance is partly due to the 3.3% depreciation of the Indian rupee. Interestingly, domestic prices shifted to a discount after the festive demand peak, with a monthly average discount of US$18/oz.
Chart 2: Domestic Gold Price Discount
Festive Demand and Beyond:
Diwali and Dhanteras, India's peak gold-buying occasions, witnessed robust demand despite record prices. Industry feedback confirms that investment-oriented buying, especially for bars and coins, drove this strength. E-commerce platforms and digital gold purchases also thrived. Post-festivities, demand softened, but the wedding season is expected to revive jewellery sales.
Gold ETFs: A Magnet for Investors:
October marked the sixth consecutive month of strong inflows into Indian gold ETFs, totaling INR77bn (US$876mn). This surge in interest has propelled cumulative inflows for the first ten months of 2025 to a record INR276bn (US$3.1bn). The assets of these funds have reached historic levels, with AUM climbing to INR1,021bn (US$11.5bn) and gold holdings at 83.5t, a third of which were added in 2025 alone.
Chart 3: Indian Gold ETF Performance
Gold Imports Defy Price Rally:
In a surprising twist, gold imports surged in October, reaching a new peak, despite domestic prices touching record highs. This indicates a strong underlying demand. Imports climbed to US$14.7bn in value, a ~200% y/y increase, and import volumes rose to an estimated 137-142t. Seasonal factors, such as Diwali and the wedding season, played a significant role in this surge.
Chart 4: Gold Imports Surge
Controversy and Comment:
The Indian gold market's resilience and the surge in gold ETFs and imports have sparked interest and debate. Some argue that the strong demand during the festive period and the wedding season is a testament to gold's enduring appeal. But here's where it gets controversial: is the recent surge in gold imports a sign of a speculative bubble, or a rational response to global economic uncertainties? Share your thoughts in the comments below. The market's dynamics and the role of gold as a safe-haven asset are certainly intriguing, inviting further exploration and discussion.
