Why India’s Diwali gold rush is different this year

Forward of the Hindu competition of Diwali, the jewelry market in Indian capital Delhi’s vibrant Lajpat Nagar neighbourhood is teeming with crowds.

Outlets have stayed open even on holidays, and at nightfall, dozens of automobiles line up the streets as a string of flashy signboards beckon consumers into the flower-adorned shops.

Hovering gold costs – which have topped $1,440 (£1,081) for 10g – could have barely dented demand for jewelry on this planet’s second largest marketplace for the yellow steel this 12 months, however Indians should not prepared to completely hand over on their penchant for gold but.

Diwali, together with Dhanteras – a smaller competition that falls on Saturday this 12 months – are believed to be auspicious events to purchase valuable steel, with a whole lot of hundreds of Indians flocking the markets to purchase gold and silver cash, bars and jewelry, which they consider convey wealth and luck.

Skyrocketing costs have created FOMO – or the concern of lacking out – within the minds of consumers, who’re fearful costs may rise even additional, Prakash Pahlajani, who runs Kumar Jewels, a family-owned enterprise, instructed the BBC on a busy night at his store.

“Consequently, I’ve extra clients this 12 months,” Mr Pahlajani mentioned.

However with costs – gold is up 60% and silver 70% – taking pictures via the roof, jewellers are having to vary tack to counter stagnant buyer budgets.

“Persons are not saying ‘I do not need to purchase’. As a substitute, they’re saying, ‘I will purchase rather less,” mentioned Tanishq Gupta, one other jeweller down the street from Mr Pahlajani’s store.

He mentioned he is needed to be revolutionary and design items that look elaborate however have a lowered amount of gold in them. A coin product of 250mg gold, which he sells for as little as $35, is now thinner however made to look as large because the heavier ones.

Cash weighing a tenth of that, at 25mg, are additionally on supply available in the market.

Pushpinder Chauhan, one other retailer within the space, mentioned larger costs had additionally exacerbated the rising choice for lighter jewelry this 12 months, “particularly amongst youthful consumers” who need items for on a regular basis put on and never simply particular events.

A number of jewellers the BBC spoke to pointed to a different clear pattern – extra clients had been shopping for gold and silver for funding moderately than jewelry this 12 months, one thing that can be mirrored in bullion market information.

Whereas gold jewelry continues to account for the most important share of India’s general gold demand, the proportion pushed by funding – primarily bars and cash – has been rising steadily, in line with the World Gold Council (WGC).

“Jewelry’s share declined to 64% within the second quarter of this 12 months, from 80% in the identical interval in 2023, whereas funding demand elevated from 19% to 35% over the identical interval,” Kavita Chacko, the council’s analysis head, instructed the BBC.

Loads of that demand can be being fed by funding in exchange-traded funds (ETFs) or digital gold, the place September marked file excessive inflows.

ETF belongings beneath administration have surged by over 70% this 12 months.

Moreover retail demand, gold costs are additionally being considerably influenced by India’s central financial institution, with the steel’s share in its international trade reserves rising from 9% to 14% in 2025, in line with WGC.

In truth, the Reserve Financial institution of India (RBI) has been “a significant pillar of worldwide gold demand over the previous three years”, mentioned Kaynat Chainwala who tracks commodities at Kotak Securities, a broking home.

She mentioned the RBI has been stocking up on gold in a bid to diversify its international trade holdings, scale back its dependence on the greenback and supply stability throughout geopolitical stress.

Going ahead, with the festive and the marriage season beneath approach, retail demand for gold and silver is anticipated to proceed to carry up regardless of record-high costs, say specialists.

“The prosperous lessons will proceed to purchase, although it’s a setback for decrease earnings households,” mentioned Madan Sabnavis, the chief economist on the state-run Financial institution of Baroda. “Demand will maintain up in worth phrases, though volumes will fall.”

However some households have been completely priced out of the market.

“I’m now having to assume lots whereas shopping for – about whether or not to even get one thing,” Bhavna, who’s getting married in February, instructed the BBC outdoors Mr Pahlajani’s jewelry retailer.

For the second, she’s held off her purchases and is ready for costs to fall a bit in order that she will come again to complete her marriage ceremony buying.

Such sturdy cultural affinity for bodily gold, notably jewelry, means the urge for food for the noble steel is unlikely to be dented in the long run, regardless of the short-term moderation, say specialists.

That is very true for a rustic the place excessive gold holdings have given strong long-term returns, making many Indians prosperous at a time when progress is stumbling and jobs are arduous to return by.

In response to the US funding financial institution Morgan Stanley, Indian households held a staggering $3.8tn of gold, equal to 88.8% of the nation’s GDP.

“This means a optimistic wealth impact on the family stability sheet, given the uptrend in gold costs,” Economists Upasana Chachra and Bani Gambhir wrote in a latest notice, including that Indian households are additionally benefitting from “cyclical elements of decrease curiosity funds with financial coverage easing, and the optimistic influence on disposable earnings via direct and oblique tax cuts”.

That is not a nasty begin to the festive season, though file costs could have taken some glitter off the valuable steel.

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