Gold jewellery demand down, demand for gold ETFs on the rise: Is India shifting towards paper gold?

Domestic demand for gold jewellery has been falling for three years straight, data from the World Gold Council (WGC) has revealed, with demand for gold ETFs hitting all-time highs.

Gold has been more than just a precious metal to Indians with deep roots in the country’s culture and traditions. The yellow metal has not only been a symbol of prosperity but also an important part of India’s religious ceremonies and celebrations including weddings in the form of jewellery. However, while gold’s demand and prices in the country have been on the rise, ways of investing in gold have taken a different direction. With physical gold and traditional forms of buying the precious like jewellery increasingly losing their appeal, other ways of investing in gold like ETFs have been getting all the added attention.

The yellow metal is a safe haven and investors dive into investing in gold when other investments like stocks and currencies get risky. Gold’s risk premium has given it the edge that has kept its demand and prices up with all the market corrections seen at the current time.

Falling demand for gold jewellery and the rise of gold ETFs

Gold jewellery demand has fallen to 563 tonnes in 2024 from 610 tonnes in 2021, 600 tonnes in 2022 and 575 tonnes in 2023, CNBC-TV18 reported citing WGC data. Gold is now seen as an investment tool more than it is seen as a traditional and cultural addition, and when combined with the jewellery’s making charges ranging between 10-30%, demand for jewellery has fallen in the country. Moreover, physical gold raises safety, storage and authenticity concerns due to which buying gold in the traditional way has become more unappealing for Indian customers, reports have revealed.

On the other hand, gold ETFs, that track domestic prices of physical gold, have seen a much-expected growth. Net inflows into gold ETFs climbed to ₹2,919 crore in 2023 from ₹460 crore in 2022, as per Association of Mutual Funds in India (AMFI) data. In 2024, gold ETFs soared by 216% to ₹9,225 crore, the data revealed.

Furthermore, net inflows in gold ETFs climbed to ₹3,751.4 crore in January 2025 from the nine-month low figure of ₹640.16 crore in December 2024, marking a growth of 486%.

To top it all off, the Union Budget 2024 made gold ETFs more appealing by offering tax relief. Before, there was a tax of 20% on long-term capital gains (LTCG) on gold ETFs with indexation if held for more than three years. Now, gold ETFs are considered long-term assets if they are held for just one year and are taxed at 12.5%, without the need for indexation. Meanwhile, physical gold such as jewellery, bars, and coins still requires a 24-month holding period to avail of LTCG benefits.