Indian Gold Demand Tilts Toward ETFs as Prices Surge 50%

India’s gold market is undergoing its most significant structural transformation in decades. Investment-oriented products now account for 40-45% of total consumption, up from 30-35% historically, according to Deloitte’s Praveen Govindu. This shift represents a fundamental departure from the jewelry-dominated demand patterns that have characterised the world’s second-largest gold market for generations.

Gold prices surged 33% in FY2025 and exceeded 50% in H1 FY2026, reaching INR 139,799 per 10g. This sustained price appreciation is fundamentally altering consumption patterns, driving consumers toward investment products whilst reshaping traditional jewelry purchasing behaviour.

This analysis examines the investment product surge across ETFs, bars, coins, and digital platforms; the jewelry market’s adaptive response to price pressure; and the structural drivers reshaping Indian gold demand. Expert perspectives from the World Gold Council, ICRA-ASSOCHAM, and Deloitte inform the forward outlook for this globally significant market.

Understanding India’s Gold Demand Composition

India occupies a unique position as the world’s second-largest gold consumer, with 85-88% import dependency and approximately 87% of households owning gold. This consumption scale makes shifts in demand composition globally significant, influencing international gold flows and pricing dynamics.

The World Gold Council’s Gold Demand Trends quarterly report tracks granular consumption patterns across jewelry, bars and coins, ETFs, and central bank purchases, providing the industry-standard methodology for measuring Indian gold demand composition and structural shifts.

Gold demand in India divides into two primary categories, each with distinct characteristics:

• Jewelry demand: Ornamental purchases, wedding gold, and gifting. Historically comprised 65-70% of total Indian gold demand.
• Investment demand: Gold ETFs, bars and coins, digital gold platforms, and sovereign gold bonds. Traditionally represented 30-35% of consumption.

The distinction between these categories matters because jewelry demand tends to be price-inelastic and culturally driven, whilst investment demand responds to financial market dynamics and safe-haven sentiment. The shift between categories signals changing consumer psychology, moving from ornamental and cultural motivations toward financial asset accumulation.

Record-Breaking Investment Product Growth

Gold ETFs recorded their strongest performance in history during 2025, with inflows reaching INR 430 billion (US$4.9 billion, 37 tonnes). December 2025 alone added INR 116 billion, marking an unprecedented eighth consecutive month of gains. This sustained momentum reflects structural demand rather than temporary market timing.

The investor base expansion reveals market democratisation beyond traditional gold buyers. ETF folios reached 10.2 million (up 60% year-on-year), whilst digital gold’s UPI-based platform growth surged from INR 8 billion to INR 21 billion in monthly transaction value. These figures represent 3.8 million new folios added in 2025, indicating genuine market expansion rather than existing buyers shifting between products.

> ICRA-ASSOCHAM Report Finding

> A structural shift has been identified in Indian and global gold markets, with investment-led demand now dominating. This transformation is driven by high prices and geopolitical uncertainties reshaping consumer behaviour.

Jewelry Market Adaptation Under Price Pressure

Jewelry demand fell 24-26% in volume during H1 FY2026 and late 2025, yet value rose 13% as consumer budgets held firm. According to the World Gold Council’s Sachin Jain, this volume-value divergence reflects adaptation rather than abandonment of gold purchases. Consumers are maintaining their gold expenditure whilst adjusting purchasing patterns to accommodate elevated prices.

Consumer adaptation strategies include:

• Lightweight designs replacing heavier traditional pieces to maintain affordability
• Lower-karat gold (18K, 14K) gaining market share, as noted by Deloitte’s Praveen Govindu
• Reduced making charges preferred to lower total transaction costs
• Plain gold jewelry purchases nearly doubled year-on-year versus studded or elaborately crafted pieces

Listed jewelry retailers reported 37-51% year-on-year revenue growth in October-December 2025. This price-led growth offset volume declines, indicating category resilience despite the structural demand shift toward investment products.

Deloitte’s Praveen Govindu highlighted that Indian consumers are increasingly choosing 18-karat and 14-karat jewelry rather than higher-purity options due to elevated prices. This behavioural change represents a departure from traditional preferences and may persist beyond the current price cycle, permanently altering the jewelry market’s product composition.

Drivers Behind the Structural Shift

With gold at INR 139,799 per 10g following 33% and 50%+ annual gains, jewelry purchases at traditional weights have become prohibitive for middle-class buyers. Investment products offer gold exposure at accessible entry points, from fractional digital gold purchases to single-gram bars, democratising access beyond the jewelry market’s higher transaction minimums.

Multiple reinforcing factors drive the investment shift:

• Price appreciation making traditional jewelry weights unaffordable for typical household budgets
• Geopolitical uncertainty enhancing gold’s safe-haven appeal, as identified by ICRA-ASSOCHAM
• Digital accessibility via UPI-based platforms lowering investment barriers and transaction friction
• Generational shift toward viewing gold as a financial asset rather than purely ornamental
• Inflation hedging driving retail investment demand amid broader macroeconomic concerns

Recycling declined 19% in 2025 despite favorable prices, suggesting holders view current price levels as sustainable rather than peak-selling opportunities. The Reserve Bank of India’s slowdown to only 4 tonnes added in 2025 reflects broader institutional reassessment of gold’s pricing trajectory and portfolio positioning.

The Reserve Bank of India’s Report on Management of Foreign Exchange Reserves provides detailed quarterly data on central bank gold holdings, purchasing activity, and foreign exchange policy framework governing India’s official sector gold accumulation.

Whilst price normalisation could restore some jewelry demand, digital platform penetration and the expanded investor base suggest lasting structural changes. The 3.8 million new ETF investors represent a permanently expanded gold investment constituency unlikely to reverse entirely even with price corrections.

Outlook for Indian Gold Demand

The World Gold Council’s Sachin Jain expects jewelry demand to rebound if and when prices stabilise, whilst ICRA-ASSOCHAM characterises the investment shift as structural rather than cyclical. These perspectives suggest continued investment dominance with potential for jewelry recovery, though the 40-45% investment share likely represents an elevated baseline.

Deloitte’s Praveen Govindu characterises gold expenditure as bifurcating into distinct categories, with investment channels gaining permanent market share. This thesis suggests the current 40-45% investment allocation may represent a new equilibrium rather than a temporary spike awaiting mean reversion.

Key variables to monitor include gold price trajectory, digital platform expansion and regulatory developments, the regulatory environment for gold investment products, and wedding season demand patterns. These factors will determine whether investment share stabilises at current levels, continues rising, or moderates toward historical averages.

India’s gold market transformation carries global significance given its consumption scale and 85-88% import dependency. The shift toward investment-oriented demand may influence international gold flows, pricing dynamics, and supply chain positioning as the market’s composition changes. This structural evolution extends beyond domestic implications to affect global gold market mechanics.

This article is for informational purposes only and should not be considered financial advice. Investors should conduct their own research and consult with financial professionals before making investment decisions.