Gold's giant consumers flip adornment for investment...

CRAZY prices make people do crazy things, writes Adrian Ash at BullionVault.

And today's craziest news in precious metals is that people in India...

..."sink of the world" for gold since, well, since forever...

...are rushing to buy gold at these new all-time high prices, defying the country's age-old pattern of selling the spikes and buying the dips instead.

As a rule, that pattern would dent India's giant gold demand, even as last month's Hindu festival of Navrati runs into last week's Dussehra and marks the start of the gold-buying season set to climax with Dhanteras and then Diwali later this month.

And to be sure, Indian households aren't buying as much gold jewellery this autumn as Diwali 2024. Maybe 5-10% less by weight, according to Renisha Chainani, analyst at scrap-refining-and-online-shop Augmont...

...or perhaps slumping by more than a quarter according to Surendra Mehta, national secretary at trade body the India Bullion and Jewellers Association.

Rupee gold prices, after all, have jumped by one half since last October. India's economy, while the fastest-growing in the world, has expanded maybe 6.5%.

Yet instead of quitting gold, Indian households are changing how they acquire it...

...a switch we've already seen at this year's new record prices in No.1 gold consumer nation China.

"Investors are snapping up coins and bars. They're even paying a premium over record prices, hoping the rally keeps going," says Ashok Jain, owner of Mumbai gold wholesalers Chenaji Narsinghji.

Other dealers concur. And this switch...

...away from adornment towards investment...

...makes sense when you remember that, first, buying gold during Navratri, Dhanteras and Diwali is "still considered non-negotiable and auspicious" for Indian households, as Chainani at Augmont says, and second, gold bullion coins and especially bars carry much lower fabrication costs than jewellery.

That means you get more gold for your money and a better price when you come to sell, too...

(...an advantage which only gets richer if you ditch retail products entirely and move into wholesale gold, as BullionVault users already know.)

Of course, so-called 'investment' retail products aren't new in gold's giant consumer nations.

Indeed, the plain (and popular) lower-margin chunks of so-called 'investment' jewellery show how it's always impossible to split out the investment motive from India's adornment demand, too.

And over the past 15 years, in fact, demand for gold coins and small bars in China and India averaged around 25% of their households' combined gold product demand.

But at the start of 2025, that percentage leapt...

...topping 50% across the 2 nations in the April to June calendar quarter, thanks to China hitting more than 60% while India held close to 35%.

For China, that's a series record on the best available data (Metals Focus for the World Gold Council). But for India, the percentage of demand pouring into small bars and coin has been running at the strongest only since 2013, when the 25% crash in world gold prices unleashed record purchases.

This year's shift, in contrast, has come as record high prices crush China and India's adornment demand. It sank 25% over the first 6 months of this year versus the first 6 months of 2024.

But when you add in gold coin and especially small bar demand, that drop was cut to just 9% by weight year-over-year.

It also kept the total quantity of gold products bought by Chinese and Indian households greater than the low of early 2022, never mind the Covid Crash slump of early 2020.

And it also took the total Dollar value of their total demand more than 27% higher from the first 6 moths of last year (on our maths at least). Worth more than $68 billion all told, it was second only to the back-half of 2024's record $73bn total value.

Put another way, "We are starting to see indications of demand destruction through the gold jewellery sector, the largest source of demand," says analyst Bernard Dahdah at French bank Natixis.

"[But] we are not particularly concerned about this demand destruction, as the increase in investor demand alone is able to compensate."

Dahdah also thinks that "eventually jewellery demand could adapt to the current high price levels" too. Which might prove true. Asia's giant consumers have certainly adapted many times before during gold's now 26-year bull run.

Difference now, however, is that they're already adopting newer gold investment routes as well.

Gold-backed ETF trust funds, for instance. The ETFs listed in China and India have ballooned over the past 12 months of record prices, swelling by 73.0% combined to reach a record size.

That outruns the pace of growth in the rest of the world's gold ETFs more than 5-fold.

Using smartphone apps meantime...

...a path to gold which Chinese consumers have already seized on...

...India's "digital gold" accounts, led by the Indian government's MMTC-Pamp joint venture with Swiss refining giant MKS Pamp, have seen demand grow almost without pause in 2025, rising 55% by value in August compared to January...

...and reaching $133 million last month.

But that remains a tiny fraction, however, of the $3.9bn still being spent each month on average by Indian households buying gold in the form of jewellery. And for all their growth, gold ETFs in China and India combined still account for less than 1/10th of all gold ETF shares worldwide.

There's room, in short, for this trend to keep growing, if not explode, in gold's 2 giant consumer markets...

...away from gold for adornment towards gold for investment.

Bad news for China and India's massive jewellery manufacturing industries and workers.

But more support for gold's long-term uptrend.