In India, the festive season is synonymous with tradition, celebration, and gold buying. Festivals like Dussehra and Diwali are considered auspicious for purchasing gold, accounting for nearly one-third of the country’s annual gold sales.
However, the 2025 festive season raises a big question: will Indians continue their centuries-old tradition of buying gold at these prices, or will record-breaking rates dull the sparkle of celebrations this year? Let’s find out.
What’s Happening?
Gold has delivered an extraordinary performance this year. On September 25, 2025, gold prices on MCX touched around Rs 1,12,400, compared to about Rs 73,000 in September 2024. Globally, prices surged to nearly $3,738 per ounce, almost double the levels seen in September 2023.
Several key factors have fuelled this rally. The Russia-Ukraine war in 2022 and ongoing geopolitical tensions in the Middle East involving Iran, Israel, and Palestine have reinforced gold’s role as a safe-haven asset. As uncertainty deepened, central banks across the world ramped up gold purchases, pushing demand and prices higher.
Read about India’s Gold Jewellery Industry – Growth Drivers & Future Potential
Gold Demand Rising – Why?
Growing Share in Foreign Currency Reserves: In the first week of September 2025, India’s forex reserves reached $698.3 billion, of which $3.53 billion came solely from gold holdings.
RBI’s Increasing Interest: Between September 2024 and March 2025, the Reserve Bank of India bought around 25 metric tons of gold, taking its total holdings to 882 tons.
Geopolitical Tensions and Economic Security: Central banks are steadily cutting their dependence on the dollar. With dollar fluctuations and rising geopolitical risks, gold remains the preferred safe-haven asset.
Rising Purchases by Central Banks: The trend is global. In Q1 2025, Poland added 49 tons, China 13 tons, and India 3 tons to their reserves. Countries like Azerbaijan, Kazakhstan, Qatar, and Egypt have also stepped up their gold accumulation.
Record Investment and Growing Participation in Gold ETFs
At the retail level, Gold ETFs are witnessing a surge in popularity. In August 2025, a net inflow of Rs 21.9 billion ($250 million) was recorded, up 74% MoM and the second-largest gain this year. Redemptions fell to a seven-month low of Rs 1.5 billion ($17 million), showing that investors are holding on for the long term.
In August 2025, inflows into Gold ETFs shot up, with holdings crossing 70 tons, reflecting strong investor appetite.
The total AUM of Gold ETFs has reached an all-time high of Rs 724 billion ($8.3 billion), while holdings stand at 70 tons. That same month, 1,64,000 new folios were added, bringing the total to 8.03 million, a 24% jump since the beginning of the year. The launch of a new Gold ETF in August has also taken the total number of such funds in India to 22.
The rising interest in both physical gold and ETFs ahead of the festive season suggests that demand is likely to remain robust.
What Does This Mean for Investors?
After such a steep rally, the big question is whether gold prices could cool off. According to Mint, Ross Maxwell of VT Markets believes the outlook remains positive. Slow economic growth in the US, inflationary pressures, central bank buying, and potential rate cuts are all likely to support gold in the long run.
That said, short-term risks exist. If rate cuts are delayed or US economic data surprises on the upside, gold prices could come under pressure. But in the long term, persistently high inflation or a weaker dollar could propel gold to new highs.
What’s Next?
India has now surpassed China to become the world’s largest consumer of gold. Indian households are estimated to hold nearly 24,000 tons of gold, more than the combined holdings of all the world’s central banks. For centuries, gold in the form of jewellery and coins has been seen not just as auspicious, but also as a financial cushion for major life goals like children’s weddings. This cultural tradition continues to fuel festive and wedding-season demand.
But high prices are starting to reshape buying patterns. According to Financial Express, Titan’s jewellery division CEO noted that demand has weakened in the Rs 50,000–1,00,000 price range, while premium and luxury jewellery sales remain strong. Meanwhile, India Today reports that global institutions like UBS and Goldman Sachs project further upside in gold, with targets between $3,800 and $5,000 per ounce. In this context, global momentum combined with India’s cultural affinity makes gold not just an investment but also a timeless asset tied to tradition.
*The article is for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
