India’s annual Diwali gold rush is witnessing a notable shift this festive season, as record-high prices are driving consumers to prioritize investment over ornamentation and opt for lighter, more practical jewellery pieces. This change reflects broader economic trends and evolving consumer preferences in the world’s second-largest gold market.
Ahead of Diwali, markets in Delhi’s Lajpat Nagar are bustling with shoppers, but the dynamics have changed. Soaring gold prices, which have topped $1,440 for 10 grams, have slightly dampened jewellery demand, yet Indians’ cultural affinity for gold remains strong. Festivals like Diwali and Dhanteras are considered auspicious for buying precious metals, believed to bring wealth and luck, drawing hundreds of thousands to markets.
A key trend this year is the move towards gold as an investment rather than mere adornment. According to the World Gold Council, jewellery’s share of India’s gold demand fell to 64% in the second quarter of 2025 from 80% a year earlier, while investment demand rose from 19% to 35%. This shift is fueled by purchases of bars, coins, and digital gold, with exchange-traded funds seeing record inflows and assets under management surging over 70% this year.
Jewellers are responding innovatively to stagnant budgets by designing pieces that look elaborate but contain less gold. For instance, coins as light as 250 milligrams are sold for as low as $35, made to appear larger than their weight. Pushpinder Chauhan, a retailer, notes a growing preference for lighter jewellery, especially among younger buyers who favor everyday wear over occasional use, exacerbating the trend towards practicality.
The fear of missing out on further price rises is driving some to buy now, but others are cutting back. Prakash Pahlajani of Kumar Jewels reports more customers this year, yet they’re buying smaller quantities. Bhavna, a bride-to-be, has postponed her wedding shopping, hoping for a price drop, illustrating how high costs are affecting lower-income families and forcing careful consideration of purchases.
Beyond retail, India’s central bank, the Reserve Bank of India, has been increasing its gold reserves, now accounting for 14% of foreign exchange holdings in 2025, up from 9%. This diversification aims to reduce dollar dependence and provide stability during geopolitical stress, with the RBI being a major pillar of global gold demand over the past three years, according to analysts.
Experts like Madan Sabnavis of Bank of Baroda predict that demand will hold in value terms despite falling volumes, with affluent classes continuing to purchase. The strong cultural ties and gold’s role as a store of wealth—Indian households hold $3.8 trillion in gold, equivalent to 88.8% of GDP—suggest long-term resilience, even as short-term adjustments occur due to economic factors like lower interest payments and tax cuts.
This Diwali, while record prices may have dimmed some of the glitter, the shift towards investment and lighter jewellery underscores a maturing market. As the festive and wedding seasons progress, gold’s allure in India remains undimmed, balancing tradition with modern economic realities and ensuring its place in the household economy.