Indians Ditch Jewellery for Bullion as Gold Investment Surges 52%

Gold continues to shine amid rising geopolitical uncertainties, particularly in Indian households. In the March quarter, gold investment demand overtook jewellery consumption for the first time, as investors increasingly turned to the safe-haven asset, the World Gold Council (WGC) said on Wednesday.

The shift in purchasing behaviour comes as a surge in investment demand offset a decline in jewellery purchases amid soaring prices, helping stabilise overall gold demand during the quarter, the council said.

Investment demand jumped 52% year-on-year to 82 metric tonnes in the March quarter, while jewellery demand fell 19.5% to 66 tonnes, according to the WGC report. Meanwhile, central banks purchased a net 244 tonnes of gold in Q1, despite a noticeable increase in selling activity.

Earlier this month, industry body ASSOCHAM said the gold held by Indian households far exceeds the combined reserves of the world’s top 10 central banks. India itself holds the eighth-largest officially recognised gold reserves globally, according to WGC data.

“For the first time, investment demand has surpassed jewellery demand,” said Sachin Jain, Chief Executive of WGC’s India operations, in a statement to Reuters.

Geopolitical Support

Geopolitical tensions are expected to continue supporting gold investment demand, although inflows into gold ETFs and over-the-counter (OTC) markets may moderate compared to 2025, the report said.

In contrast, demand for bars and coins is likely to strengthen in 2026, driven by high prices, limited alternative investment avenues, persistent inflation concerns, and heightened uncertainty.

Asia is expected to remain a key driver of demand, as geopolitical risks enhance gold’s appeal as a hedge. “Investment and central bank demand will remain supported by ongoing geopolitical risks, alongside elevated inflation and persistently high gold prices,” the report noted.

However, jewellery demand is likely to remain under pressure due to elevated prices, even as overall spending stays relatively resilient.

India Demand Trends

A clear divergence has emerged across consumer segments. High-income buyers continue to purchase heavier jewellery despite elevated prices, while mass-market consumers are cutting back or shifting to lighter, lower-carat, or studded products to manage costs.

Some buyers have also pivoted to bars and coins, which carry lower premiums than jewellery. Exchanges of old jewellery for new pieces accounted for a significant share of market activity during the quarter.

Meanwhile, borrowing against gold remained strong, with outstanding retail bank loans backed by gold jewellery rising 124% year-on-year to ₹4.3 trillion as of end-February.

Fed Policy May Cap Gains

Gold typically performs well in a low interest rate environment. However, with inflation, recession risks, and supply chain disruptions persisting, global central banks face challenges in balancing price stability and growth.

In the US, inflation rose to 3.3% in March, above the Federal Reserve’s 2% target. Prior to the onset of the US-Iran conflict on February 28, markets had expected a 25 basis point rate cut in 2026. However, given evolving geopolitical and economic conditions, expectations have now shifted to 2027.

The Federal Open Market Committee (FOMC) is set to announce its policy decision later on Thursday, with markets pricing in a 100% probability of a pause. The current Fed funds target range stands at 3.75%–3.50%.