India's Gold Market: Leveraging Festive Demand and Monetary Tailwinds in H2 2025

India's gold market is poised for a transformative second half of 2025, driven by a confluence of cultural, economic, and geopolitical factors. After a subdued first half marked by high prices and seasonal lulls, the interplay of anticipated Federal Reserve easing, a weaker U.S. dollar, and the upcoming festival and wedding season creates a compelling case for strategic entry points. Investors who align with these dynamics could capitalize on a market correction and renewed consumer demand.

The Pent-Up Demand Story

India's gold demand in H1 2025 fell to a five-year low for jewelry, with consumption dropping 21% year-on-year to 160 tonnes. High prices—driven by a depreciating rupee and global geopolitical tensions—discouraged traditional buyers, particularly in urban centers. However, rural demand remained resilient, supported by agricultural income growth and cultural traditions. The India International Jewelry Show (IIJS) in July 2025 signaled a shift: retailers began restocking lighter-weight jewelry and smaller pieces to cater to price-sensitive consumers. This adaptation suggests that demand is not collapsing but evolving.

The festive season, spanning Diwali, Dussehra, and the wedding peak in October–December, is expected to drive a rebound. Historical data shows that gold demand surges by 30–40% during these months. With gold prices in India currently at ₹9,341 per gram (down from ₹100,000 per 10 grams in April 2025), the market is primed for a correction. Retailers are already preparing, with anecdotal reports of increased orders for 1–5 gram pieces and gold coins.

Monetary Tailwinds: Fed Easing and the Rupee

The Federal Reserve's anticipated rate cuts in late 2025 will weaken the U.S. dollar, indirectly supporting the Indian rupee. As of August 2025, the CME FedWatch tool indicates an 85% probability of a 25-basis-point cut in September, with further easing expected into 2026. A weaker dollar reduces the cost of gold imports, which account for 70–80% of India's consumption. This could lower domestic gold prices by 5–10% in H2 2025, making gold more accessible to price-sensitive buyers.

The USD/INR exchange rate is projected to stabilize around 87.60–88.00 by Q4 2025, up from 86.50 in July. While the rupee remains under pressure due to a widening current account deficit, the Fed's dovish pivot will mitigate further depreciation. Investors should monitor the Reserve Bank of India's (RBI) interventions, such as gold import duty adjustments or FX swap lines, which could influence the rupee's trajectory.

Strategic Entry Points for Investors

1. Gold ETFs and Digital Gold: With gold ETFs in India seeing a 96% year-on-year increase in assets under management (AUM) to ₹676 billion by July 2025, these instruments offer liquidity and diversification. Investors should consider entering as gold prices dip below ₹9,300 per gram, a level last seen in early 2025.
2. Physical Gold and Jewelry: Retailers and jewelers are restocking for the festive season, creating opportunities for investors in gold manufacturing and distribution chains. Look for companies with strong rural market penetration and cost-efficient production.
3. Gold Loans and Pawnbrokers: The gold loan market is expanding as higher valuations allow borrowers to secure larger loans. Non-banking financial companies (NBFCs) with robust gold appraisal and collateral systems are well-positioned to benefit.

Geopolitical and Institutional Factors

Gold's role as a safe-haven asset remains intact. Central banks, including the RBI, continue to add to gold reserves, while geopolitical tensions (e.g., U.S.-China trade disputes, Middle East instability) reinforce gold's appeal. Investors should also consider the impact of U.S. President Donald Trump's tariff rhetoric, which could trigger short-term volatility in the dollar and gold prices.

Conclusion: A Market at the Crossroads

India's gold market is at a pivotal juncture. The combination of festive demand, Fed easing, and a stabilizing rupee creates a favorable environment for investors. However, timing is critical. Entry points in late August–September 2025, as gold prices dip and retailers ramp up inventory, offer the best balance of risk and reward. By aligning with these macroeconomic and cultural tailwinds, investors can position themselves to benefit from a market poised for a strong rebound.