National News
Gold Demand Drops Over 25% During Festive Season Amid High Prices
Gold demand in India declined sharply by 28% during the first phase of the festive season, spanning from Raksha Bandhan to Onam, according to data from the India Bullion & Jewellers Association (IBJA). This marks the steepest drop in three years, attributed mainly to soaring gold prices, which saw a nearly 49% year-on-year increase.
Retail prices reached approximately Rs.10,540 per 10 grams (including GST), up from Rs.74,500 during the same period last year. The significant price surge impacted consumer sentiment, leading many to either postpone purchases or opt for more affordable alternatives like lower-karatage and lightweight jewellery.
While overall sales volume fell, some jewellers reported a rise in sales value—by as much as 25–30%—due to the higher prices. The average weight of lightweight jewellery also declined, shifting from 7–12 grams to around 7–10 grams.
In urban and northern markets, there has been growing demand for 18K jewellery, which offers classic designs at more accessible price points. Southern markets continue to show a preference for traditional 22K jewellery, though typically in lighter weights to accommodate tighter budgets.
Lower-karat options such as 14K and 9K gold have gained significant traction, particularly among cost-conscious consumers. Jewellers noted a notable rise in 9K gold jewellery sales, including from major brands introducing collections in this segment.
Despite the drop in jewellery purchases, investment demand for gold has remained stable, with consistent interest in gold coins and small jewellery pieces, particularly in the 2–10 gram range.
Some retailers reported a modest increase in volume and a strong uptick in sales value in the lead-up to the festive season, and expectations remain optimistic for stronger demand during Navratri and Diwali. Manufacturers are also adjusting production strategies to align with changing consumer preferences, focusing more on lightweight and lower-karatage designs.
India’s appetite for borrowing against gold is reshaping the country’s credit landscape. Outstanding gold-backed loans have surged 128% from a year earlier, crossing Rs.4 lakh crore ($48 billion) for the first time, according to data from the Reserve Bank of India. As of Jan. 31, loans secured by gold jewellery stood at Rs.4,00,517 crore, marking one of the fastest expansions in retail credit in recent years.
The boom in gold loans has helped propel overall non-food bank credit growth to 14.4% year-on-year. Personal loans now account for 34.5% of total bank lending, outpacing other segments and underscoring a broader shift toward consumer-driven credit expansion
Gold loans alone contributed roughly 9% of incremental bank credit during the period. Between January 2024 and January 2026, outstanding gold-backed credit rose by nearly Rs.3.1 lakh crore—an increase of about 338% over two years—more than quadrupling the size of the portfolio.
Two factors are driving the surge. First, gold prices have climbed roughly 152% over the past two years, increasing the collateral value of household holdings. Second, regulatory guidance requiring banks to classify loans secured by gold explicitly as gold loans has sharpened reporting and accelerated balance-sheet growth in the segment.
The trend highlights a distinctive feature of India’s financial system: households’ vast stock of physical gold, long viewed primarily as a store of wealth, is increasingly being mobilized as collateral for formal credit.
While personal lending and credit to nonbank financial companies within the services sector continue to expand rapidly, industrial credit remains uneven. Loans to micro, small and medium enterprises are growing steadily, but borrowing by large corporations has stayed relatively muted.
Since March 21, 2025, banks have added Rs.21.8 lakh crore to their non-food loan books, translating into 12% growth for the financial year to date. Yet it is gold—rather than factories or infrastructure—that is emerging as one of the most dynamic engines of India’s current credit cycle.
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