Gold Extends Rally as Investment Demand Surges; Festive Buying Rebounds in India

Gold prices extended their rally over the past week, with both international and domestic benchmarks hitting fresh highs. Internationally, the LBMA Gold Price PM advanced 6.7% in early September, building on August’s 4% rise, as weaker U.S. Treasury yields, elevated geopolitical tensions, and firm expectations of a Federal Reserve rate cut underpinned investor demand. In India, a depreciating rupee amplified price gains, lifting domestic prices 7% month-to-date to INR 106,863/10g. This surge narrowed long-standing domestic discounts, with premiums briefly emerging in late August and mid-September, reflecting renewed buying interest. 

Festive demand is gradually returning, supported by strong investment-led purchases of bars and coins. Market participants report that high-value wedding-related jewelry sales are holding steady, though elevated prices continue to weigh on lower-ticket discretionary purchases. Retailers are responding with promotions, new product launches, and exchange schemes, while bullion dealers have stepped up stocking ahead of the peak October–December season. Anticipation of a boost from upcoming GST reductions on consumer goods could also spur spending momentum. 

Investment demand has been equally robust. India’s gold ETFs recorded their second-strongest inflows of 2025 in August, with INR21.9bn (US$250mn) of net additions, while redemptions fell to a seven-month low. ETF holdings rose by 2.1t to 70t, with assets under management reaching record highs of INR724bn (US$8.3bn). 

In China, however, demand remains more mixed. Wholesale gold withdrawals from the Shanghai Gold Exchange fell to 85t in August, the weakest level for that month since 2010, as investors turned to equities. Yet, the PBoC extended its buying streak, adding 1.9t in August, marking ten consecutive months of reserve accumulation.