Gold is part of the social structure of India. As prices soar, customers watch, wait, but eventually still buy
Sidheshwar Shirsath, who lives in the outskirts of Indian Financial Capital in Mumbai, started buying gold when she got married nine years ago.
Shirsath, 35, is a driver and earns about Rs 55,000 ($889) a month. He believes gold may be a great way to build nest eggs for the future of his family.
Whenever he has some cash spent, he buys gold jewelry including rings and bracelets, and now he owns about 130 grams of gold, worth over 1 million rupees ($16,000 CDN).
“At some point after I first bought gold, interest rates started to rise, so my interest in investing is getting bigger,” Shirsath said.
In recent months, to his delight, prices have soared.
Gold sold for $3,298 per ounce on Friday morning, up more than 25% since the beginning of the year and 42% from a year ago.
The value of gold is global Rising in global economic uncertainty and geopolitical tensions, including concerns about the impact of U.S. President Donald Trump’s tariff policy.
Precious metals are often seen as a “safe haven” asset that investors flock to during times of economic turmoil.
“Gold is part of the social structure”
In India, prices have risen 30% since the beginning of the year, which is 30% driven by the depreciation of the rupee against the dollar.
But for many Indians, like Shirsath, gold is more than an investment.
“Gold is very close to Indian women,” he said. His wife, Manisha, sat next to their modest home, adorned with heavy golden sauce sauce and glittering bracelets. “They need gold, especially for festivals and weddings.”
In India, gold is mainly purchased in the form of jewelry, as it can be a way to show off one's wealth and status. Precious metals also accommodate Great religious and cultural significance.
For example, it is part of a dowry in a wedding, and buying gold during certain Hindu festivals is considered auspicious.
“India is a very unique market for gold,” said Sachin Jain, CEO of India Region. “Gold is part of the social structure and you can consume gold without having to be in any particular economic class.
“We all have a family doctor, we have a family jeweler, so to speak.”
India is the world's largest gold consumer
Jain said that in rural India, the majority of people who still live in the country (many don’t have easy access to bank accounts) is a popular way to save.
All of this means India is one of the world's largest consumers of gold, with the country's demand for precious metals reaching about 800 tons per year.
However, steep prices are affecting the amount of metal people buy.
“With jewelry consumption, whenever the price of gold goes up, consumers wait and watch,” Jaen said. “When it kind of solved the moment we see consumers come back.”
World Gold Council data shows that gold demand for India was 118.1 tons in the first three months of this year, down 15% from the first quarter of last year.
However, the value of gold demand in the country (i.e. the amount of gold purchased or invested) actually rose 22% in the first quarter of the year to Rs 94,000 crore ($15.1 billion in CDN).
“People buy lower volumes,” said Colin Shah, managing director of Mumbai-based manufacturer Kama Jewelry. “They all have budgets. If someone has $2,000 spent, they will spend that money and buy lower volumes.”
But, he said, despite the high prices, gold will never lose its light.
“In India, there is a gold culture where no one will stop buying gold because of the price,” Shah said. “In fact, they will have more confidence in the category because of their return on the money.”
Investing in gold digitally is on the rise
As Indians showed no signs of relaxation in demand for gold, the government has taken a series of steps in recent years to ensure that gold is brought into the formal economy.
These include reducing the import tax on gold from 15% to 6% last year, partly a way to reduce the attractiveness of gold entering the country to avoid paying high taxes.
The government also provides sovereign gold bonds as a substitute for physical gold.
Jain of the World Gold Council said, for example, Indians are increasingly investing in gold through digitalization, trading funds through exchanges (ETFs), and rising prices only encourage people to look at these options.
“The younger generation is becoming increasingly savvy and with the ease of technology, we think investments in gold and gold assets will become more digital,” he said.
Demand for gold investment, including ETFs, rose 7% in India to 46.7 tons in the first quarter, according to the World Gold Council.
Morgan Predicting the price of gold It could hit $4,000 in the U.S. $4,000 next year.
Shirsath said he and his family now have enough jewelry, but he still wants to continue buying gold.
“My next plan is to buy gold coins or buy bonds.”
Gold has long been seen as a stable investment, and it has become so popular in a time of global uncertainty that big stores like Costco have jumped on the trend.
