Gold reclaimed centre stage in 2025, delivering one of its strongest annual performances in more than four decades as global uncertainty reshaped investor priorities. What began as a cautious search for protection gradually turned into a broad-based reallocation toward the yellow metal, driven by geopolitical risk, shifting monetary policy expectations and sustained institutional demand.

Historic Performance Metrics

Over the course of the year, bullion prices surged between 66% and 74%, marking gold's largest annual gain since 1979—a period similarly defined by geopolitical upheaval and economic stress. The scale of the rally placed gold among the world's best-performing assets, outpacing most equity benchmarks.

The Macro Backdrop: Why Gold Thrived

The rally unfolded against a complex global backdrop. Early 2025 was dominated by tariff rhetoric, geopolitical flashpoints and fragile market sentiment. As inflation pressures eased and central banks pivoted toward accommodation, gold's appeal strengthened. Interest rates in India fell by about 75 basis points, while the U.S. Federal Reserve moved cautiously toward easing.

Minutes from the Fed's December meeting revealed a nuanced debate over economic risks, reinforcing uncertainty around the path of growth and policy. "Gold rallied during the year as a safe-haven asset amid global uncertainty," said Nehal Mota, Co-Founder and CEO of Finnovate, noting that markets were driven more by global cues than domestic fundamentals for much of the year.

Structural Demand Drivers

Unlike short-lived commodity spikes, gold's 2025 rally was anchored in structural demand. Central banks continued to accumulate gold as part of reserve diversification strategies, while investors increased exposure through exchange-traded funds during periods of equity volatility.

"Gold ETFs were quiet heroes of the year," said Nikunj Saraf, CEO of Choice Wealth, adding that persistent central-bank buying and investor demand for safety amid geopolitical and inflation concerns provided durable support to prices. According to Samit Guha, Managing Director and CEO at MMTC-PAMP, gold consumption remained primarily investment-led, reflecting its role as a safe-haven asset during economic uncertainty.

Market Adaptation and Consumer Behavior

Higher bullion prices reshaped consumer behaviour in the jewellery market. Discretionary purchases softened, while trust-driven and occasion-led categories proved more resilient. "2025 has been a year of structural recalibration rather than speculative excess," said Ankur Daga, Founder and CEO of Angara, noting that jewellery brands absorbed part of the commodity volatility instead of fully passing it on to consumers.

At the premium end, rising gold prices fostered a more selective consumer mindset, accelerating a shift away from transactional buying toward decisions rooted in emotion, meaning and legacy, according to industry participants.

Future Outlook and Market Expectations

After such an exceptional year, most market participants expect periods of consolidation rather than a reversal in trend. "A correction after a sustained rally would be healthy," said Ross Maxwell, Global Strategy Operations Lead at VT Markets, adding that gold's monetary hedge characteristics and central-bank support give it a structural advantage as a core allocation.

Brokerages remain constructive on the medium-term outlook, with expectations of elevated central-bank buying and relatively low retail participation supporting continued strength in precious metals markets.

Gold discounts in India have surged to their highest levels in more than six months as a sustained price rally significantly dampened retail buying interest. The development comes as domestic gold prices hit unprecedented levels, with dealers struggling to attract buyers despite the ongoing festive season.

Record Price Levels Deter Indian Buyers

Domestic gold prices reached an all-time high of ₹139,286 ($1,550.34) per 10 grams on Friday, tracking the rally in international spot gold rates. The surge follows spot gold's climb to a record $4,530.60 per ounce, driven by speculative buying, momentum-driven investments, expectations of additional US rate cuts, and rising geopolitical tensions.

A Kolkata-based jeweller explained the market sentiment: "People are in a festive mood and travelling, so they are not interested in making purchases at these record-high price levels."

Discount Structure Reflects Weak Demand

The impact on retail demand is clearly visible in the discount structure offered by Indian dealers:

These discounts are calculated over official domestic prices and include the mandatory 6% import and 3% sales levies. A Mumbai-based bullion dealer with a private bank noted: "The slowdown in demand is deepening as prices continue to rise. Demand is likely to remain muted over the next few weeks unless there is a significant correction in prices."

Chinese Market Shows Contrasting Trends

In contrast to India's widening discounts, China's bullion market experienced a sharp narrowing of discounts despite similarly muted retail demand. Chinese gold traded at discounts of $15 to $30 per ounce to the global benchmark spot price, a significant improvement from last week's discounts of up to $64 per ounce—the deepest in more than five years.

Bernard Sin, regional director for Greater China at MKS PAMP, attributed the discount narrowing to several factors despite weak retail demand:

• Increased speculative buying at record-high prices
• Expectations of US rate cuts
• Constrained supply due to lack of new import quotas from the People's Bank of China
• Support from a firmer yuan

For historical context, Chinese discounts had reached a record high of $87.50 in August 2020 during the COVID-19 pandemic-induced retail demand slump.

Regional Market Dynamics

Across other Asian markets, gold trading patterns varied significantly:

Vergel Villasoto, director at Silver Bullion in Singapore, observed a shift in investor preferences: "The major purchases are made on silver and platinum, not gold. As usual, once we see the run-up in gold, that's when buy orders come in due to 'FOMO'" (fear of missing out).

The current market dynamics highlight the price sensitivity of retail gold demand in India, where traditional buying patterns during festive seasons are being disrupted by record-high price levels. The contrasting trends between Indian and Chinese markets underscore the different factors influencing regional gold trading, from retail sentiment to speculative activity and supply constraints.