New Delhi, March 27 (NationPress) The gold market in India is undergoing a transformation, leaning more towards investment-oriented demand as elevated prices dampen jewellery sales, according to a report released on Friday.

The collaborative report by ICRA and Assocham indicated that the demand for gold jewellery in India has dropped by approximately 26 percent year-on-year during the first half of FY26, while demand for bars and coins has seen a 15 percent increase, partially mitigating the decline.

Globally, the consumption of gold jewellery dropped by 15 percent in FY25 and saw an additional 17 percent decrease in the first half of FY26, largely due to rising prices.

On the other hand, the appetite for investment in bars, coins, and exchange-traded funds surged by 74 percent and 60 percent, respectively, compared to the previous year.

The report anticipates that while high prices may continue to suppress jewellery demand in the short term, growing investment interest, the expansion of organized players, and increasing financialization are likely to bolster the sector's growth in the medium term.

India has emerged as the world's largest consumer of gold jewellery, surpassing China and accounting for 30 percent of global demand in FY25, buoyed by strong cultural practices associated with weddings and festivals.

In recent years, central banks have been significant gold purchasers, with annual acquisitions exceeding 1,000 tonnes between FY2023 and FY2025, helping to support prices amid global economic uncertainties.

Gold prices have surged nearly 33 percent in FY25 and over 50 percent in the current fiscal year, attributed to central bank purchases, geopolitical tensions, and the depreciation of the rupee against the US dollar.

On the supply front, India remains heavily dependent on imports due to limited domestic mining, with imports fulfilling around 85–88 percent of the total supply in recent years.

Global mine production has remained relatively consistent, accounting for 70 percent of supply. The report also notes that gold recycling has gained traction in India, contributing to supply.

The implementation of mandatory hallmarking has significantly enhanced purity assurance and recycling efficiency, with the report praising the India Good Delivery Standards (IGDS) for improving domestic refining practices and aligning Indian bars with international standards.

The organized sector now represents approximately 40 percent of the gold jewellery market, as players expand their reach through franchise models and increase their presence in tier 2 and tier 3 cities, as estimated by the report.

aar/na