India Now Relies on Gold as an Investment: Record Inflows Also in ETFs
The persistently high gold prices are changing the structures of the global gold market – and hardly anywhere as clearly as in India. While jewelry demand suffers from the record prices, more and more Indians are discovering gold as an asset class: bars, coins, and gold ETFs are moving into the foreground. According to the World Gold Council (WGC), Indian investors invested a record amount of around 10 billion US dollars in gold in the third quarter of 2025!
Sachin Jain, CEO of the India division of the World Gold Council, sees this as a fundamental change. For many Indians, gold has become a “mainstream asset” from a traditionally influenced store of value, which is consciously used for portfolio diversification – and this trend is likely to intensify further from his point of view.
Gold in India: From Jewelry to Investment
India is the second largest gold market in the world after China – and jewelry traditionally dominates physical consumption. But the latest data show a significant shift. According to the World Gold Council, investment demand in the third quarter of 2025 rose by 20% year-on-year to 91.6 tons. In terms of value, gold purchases for investment purposes even increased by 67% to 10.2 billion US dollars.
In contrast, total gold consumption in India fell by 16% to 209.4 tons in the same period. The main reason is the slump in jewelry demand: purchases of gold jewelry fell by 31% to 117.7 tons, burdened by the high price level. Gold remains a central component of weddings and festivals, but many households are reacting to the record prices with restraint.
It is noteworthy that investment demand now accounts for 40% of total gold consumption in the first nine months of 2025 – the highest share ever measured in India. This underlines how strongly gold in the country has developed from a pure “jewelry tradition” to a consciously controlled investment component.
For the full year, however, the World Gold Council expects a rather subdued picture: Jain expects physical gold demand of 600 to 700 tons for 2025 – which would be the lowest value since 2020 and significantly below the 802.8 tons of the previous year. At the same time, the WGC assumes that the fourth quarter is likely to be stronger than the third quarter due to the Indian festival season and the wedding season.
Gold ETFs: Bridge Between Tradition and Capital Market
Parallel to the physical trade in bars and coins, the importance of exchange-traded products is increasing. Jain points out that physically backed gold ETFs are gaining market share in the wake of the precious metal rally. According to data from the Indian fund association AMFI, inflows into gold ETFs reached new record levels in September.
For many investors in India, gold ETFs are a middle ground: they remain true to the well-known raw material gold, but at the same time use the flexibility of modern financial products. In contrast to the classic jewelry purchase, gold ETFs are easier to integrate into a portfolio, trade electronically and evaluate transparently. From the point of view of asset managers, they are also an instrument to strategically map gold in asset allocation.
The increased interest in gold ETFs is also in the context of global gold price developments. Gold has risen massively in 2025, driven by strong central bank demand, geopolitical tensions, a weaker US dollar and an increasing desire of private investors to hedge currency and market risks. The Indian market reflects these global trends, even if the demand shifts from jewelry to investment forms.
Pension Funds and Gold: New Opportunities for ETFs
A regulatory change could be of particular importance for the future role of gold in the Indian financial system. The pension regulator PFRDA has revised the investment regulations for the National Pension System (NPS) and the Unified Pension System (UPS), opening up access to gold and silver ETFs.
A new subcategory has been introduced for the state sector under “Asset Backed, Trust Structured and Miscellaneous Investments”. It allows pension fund managers to invest in regulated gold and silver ETFs. However, the share is clearly limited to a total of up to 1% of the assets under management (AUM). Slightly more generous rules apply to private savers within the framework of the NPS: up to 5% of the AUM can be invested in gold and silver ETFs there.
The scope for equity investments has also been expanded: instead of only investing in the top 200 companies, pension funds will be allowed to invest in the 250 largest listed companies in the future. The regulator is thus responding to the desire of many savers for higher return opportunities, but at the same time trying to limit the risk.
For the gold market, these changes are another building block towards institutional anchoring. In the short term, the volumes remain manageable due to the low percentage limits, but in the long term, the step means that gold can systematically become part of the strategic allocation of large Indian pension assets. In a market in which physical gold ownership is culturally ingrained, this institutional channel could open up additional sources of demand in the medium term.
Significance for the Global Gold Market
The current developments in India exemplify how the gold market is changing structurally. Record prices are putting pressure on classic jewelry demand, but they do not prevent investors from increasingly using gold as a financial investment. The shift towards bars, coins and gold ETFs, combined with new regulatory openings in the pension sector, is likely to further strengthen India’s role as a key country in the global gold market.
For international observers, it is particularly interesting that investment demand in India is rising significantly despite high prices. This suggests that gold is increasingly being perceived as an independent asset class – regardless of short-term price fluctuations and far from purely traditional usage patterns.
Source: https://goldinvest.de/en/