Can Festive Demand Offset Rising Gold Prices and Global Tariff Uncertainty in India's Bullion Market?

By Aksha Kamboj,

For decades, the bullion market has reflected the condition of the world economy, acting as a sentiment and stability barometer. As India approaches its festive season, the question that hangs in the air is: Can traditional demand balance the recent global price run-up in gold and silver, in addition to chronic tariff uncertainty in developed economies?

In the last fortnight, the price of gold has moved up significantly due to international geopolitical situations, shifting U.S. bond yields and an appreciating dollar. These events travel quickly to India, and we see a change in jewellery prices and the consumers' view on gold. Although previous trade wars and tariff announcements made a more acute impact on exports from India, this time the impact seems to have been diluted. Indian plain gold jewellery exports to the U.S. are still minimal, protecting the industry from direct tariff shock. The true test is at home, as rising prices are testing jewellery demand, especially in price-sensitive rural India.

India is the second-largest gold user in the world and is facing challenges with affordability. Apart from cultural demand, the growing applications of silver in electronics and renewable energy provide a structural underpinning, making it a little bit more than just a festival substitute. For years, festivals and weddings have covered demand for bullion while addressing global crises. However, this year, consumer sentiment will take centre stage. In terms of this year, festive demand will be the foundation of demand, but its strength could fall below last year's sentiment. Rural consumption, which has long supported gold demand, will also be nuanced if prices remain elevated.

Investors are profoundly changing popular preferences around bullion as they are now investigating where to invest in bullion. Products like gold ETFs, sovereign gold bonds (SGBs) and digital gold are continuing to gain traction and help to supplement traditional jewellery buying. Buying into ETFs, for example, is indicative of a growing confidence in gold as an inflation hedge and haven, even with high prices causing pain on physical consumption. India's bullion market, therefore, is at a phase where it is resistant to tariff forces but bound by local affordability. Although world trade tensions will colour general sentiment, their direct effect on exports from India is negligible. The bigger concern is back home, where the high cost of gold may dampen jewellery purchases, pushing customers and merchants towards silver and financial gold instruments.

Another dimension shaping this year's bullion outlook is the behavioural development of urban consumers. In metro areas, gold is no longer simply seen as a consumer product; firstly, in the ornamental or cultural sense, it is starting to be adopted as a means of financial security. Urban consumers, particularly younger professionals, are showing an increasing level of interest in digital wallets for gold, gold savings plans, and fractional ownership of gold offered by fintech platforms. This significantly widens access to gold, and is commodifying its status beyond the basic jewellery purchase that is usually a large ticket item.

Lifestyle factors are influencing purchase behaviour as well. Retailers are introducing collections to appeal to millennials and Gen-Z, combining heritage, understated designs with more modern style. Demand for silver also appears to be rising in urban centres, not only in jewellery items, but in utility and décor items as well, which may reflect an aspirational sense of affordable luxury. Put simply, taken together, these observations point to a major structural shift underlying the change, rural India and its continued anchoring of cultural demand for gold, and urban India, which is increasingly driving the future of bullion consumption and the ability to combine the best of tradition with the best of innovation are occurring simultaneously. The path of two cities and the ability to merge the two streams is uniquely how Indian bullion participation has the potential to weather price uncertainty and ensure continued momentum in the aggregate.

India's gold market, once more, reveals its dual nature, both receptive to international shocks and robust due to cultural foundations. If gold keeps its upward momentum, the market could see a slow shift towards silver and gold products linked to investment over heavy jewellery buying. The upcoming festive season will be the litmus test of this equation, with India's demand for gold and silver not just dictating domestic consumption patterns but possibly acting as a stabilising force on the global bullion platform.