As Diwali approaches, India’s gold market is abuzz with anticipation and anxiety. The country, long celebrated for its deep-rooted cultural affinity for gold, is witnessing a remarkable surge in prices and demand, fueled by a complex blend of domestic festivities, global economic turbulence, and shifting investment patterns. On October 11, 2025, the price of 24-karat gold in India stood at ₹12,370 per gram, with 22-karat at ₹11,339 and 18-karat at ₹9,277. These rates, reported by Mathrubhumi, were echoed in major cities like Chennai, Mumbai, Kolkata, Bangalore, Hyderabad, and Kerala, though Delhi saw a slight uptick with 24-karat gold at ₹12,385 per gram.
The timing couldn’t be more critical. Diwali, falling on November 1 this year, is traditionally the busiest season for gold purchases in India. Families flock to jewellery stores to buy gold for both religious and cultural reasons, spiking domestic demand. But this year, buyers are facing a rally that shows little sign of abating. According to Mathrubhumi, not only are prices higher, but India’s gold and silver imports nearly doubled in September compared to August, as banks and jewellers scrambled to build inventories ahead of the festival season and in anticipation of higher import taxes.
What’s driving this relentless surge? The answer, it turns out, is a potent mix of local and international factors. Globally, gold has become the go-to safe haven for investors wary of economic chaos and uncertainty. CNN reported that on October 12, 2025, gold prices hit a record $4,000 an ounce. The triggers are many: the US government shutdown, persistent economic uncertainty, and widespread expectations that the Federal Reserve will cut interest rates. In such turbulent times, gold’s reputation as a reliable store of value only grows stronger.
But that’s not all. The weakening of the Indian rupee has made importing gold more expensive, further pushing up domestic prices. Dealers have reported premiums of $8–10 per ounce over official domestic prices, which include a 6% import duty and 3% sales levies, signaling strong physical demand. Despite a slowdown in global demand from markets such as China, Indian retail demand is expected to remain robust through Diwali, as per Mathrubhumi.
This demand is not limited to households and jewellers. Central banks, too, are in a gold-buying frenzy. China, for example, has been particularly aggressive. According to News18, the People’s Bank of China acquired approximately 39.2 tonnes of gold between January and September 2025, bringing its total reserves to a staggering 2,298.5 tonnes as of October 8. While China has been adding between 2 and 5 tonnes of gold monthly, September saw a temporary slowdown with only 0.4 tonnes acquired. The motives are strategic: to reduce reliance on the US dollar, shield assets from international sanctions, and hedge against inflation. "Gold acts as a shield in times of global instability," a senior analyst told News18.
India is following a similar playbook. The Reserve Bank of India (RBI) has steadily expanded its gold reserves, which now total 880 tonnes as of October 8, 2025. Of these, about 512 tonnes are stored domestically in Nagpur and Mumbai, with the rest held overseas at the Bank of England and the Bank for International Settlements. Over the past decade, India’s gold holdings have surged by nearly 58%, rising from 557.7 tonnes in 2015 to 880 tonnes today. Gold now accounts for 11.7% of India’s total foreign exchange reserves. The pace of accumulation has accelerated since 2022, reflecting a global trend among central banks—including those in Russia and Turkey—toward strengthening economic security through strategic gold reserves.
For individual investors, the gold rush is taking on new forms. Sovereign Gold Bonds (SGBs), government-backed securities that pay 2.5% annual interest, have become a hot commodity. Each SGB unit represents one gram of gold, is tax-free on maturity, and involves neither storage costs nor expense ratios. However, as The Economic Times reports, the government has stopped issuing new SGBs, sharply limiting supply. On October 10, 2025, the SGB Feb 32 IV series traded at ₹15,266 on the NSE—a whopping 26% premium over the spot price of ₹12,085 per gram. The SGB Dec 31 III series fetched ₹14,556 per gram, a 20% premium.
Why are investors willing to pay these hefty premiums? It’s the promise of annual interest, tax-free capital gains, and the absence of mutual fund-like expense ratios. As Sandeep Raichura, CEO of PL Capital’s retail broking and distribution, explained to The Economic Times, "Due to limited supply, the impact cost goes up if there is a large purchase, pushing up prices." But there’s a catch: if the current frenzy cools off, exiting the secondary market could become difficult, and the premium may vanish, leading to losses. Wealth advisors have flagged liquidity risks, warning that SGBs may not always be easy to sell at fair value. "You cannot stagger using SIPs, there is no assurance of liquidity, and since the maximum tenure is only eight years, you cannot hold them beyond maturity," said Pranab Uniyal of HDFC Tru, the wealth advisory arm of the HDFC group, who instead recommends gold ETFs for better liquidity and more accurate price tracking.
For shoppers and investors alike, this rally presents a double-edged sword. On one hand, gold’s role as a hedge against inflation and economic uncertainty is undeniable. On the other, sharp price gains mean festival purchases are more expensive, and the risks of entering the market at these elevated levels are real. Experts suggest that while the long-term fundamentals remain strong—driven by institutional investors and central banks rather than speculators—buyers should exercise caution in the short term. Any temporary pullbacks could offer buying opportunities, but the possibility of a correction, especially if global uncertainties ease, cannot be dismissed.
Adding to the complexity, India’s gold and silver imports nearly doubled in September from August as banks and jewellers rushed to stock up for the festival season and to preempt higher import taxes. Dealers reported robust premiums, signaling that physical demand remains strong. Despite slowing global demand in markets like China, cultural sentiment and costly imports are likely to keep prices firm in the coming weeks, according to Mathrubhumi.
In summary, India’s gold market is at a crossroads, shaped by a unique convergence of tradition, global finance, and shifting investment strategies. The coming weeks, leading up to and beyond Diwali, will be a crucial test for both buyers and policymakers as they navigate the golden maze of opportunity and risk.