Festive demand, global cues to keep gold momentum steady: Aditya Birla Sun Life AMC

Gold prices are expected to retain positive momentum as India heads into the festive season, supported by global cues and domestic factors, according to research by Aditya Birla Sun Life Asset Management Company (Aditya Birla Sun Life AMC), citing World Gold Council data.

Aditya Birla Sun Life AMC noted that international gold prices rose over 1% in August to $3,335 per ounce, extending a small gain in July. The rise was driven by a weaker US dollar, expectations of a US Federal Reserve rate cut, and inflation concerns.

Geopolitical uncertainty and tariff-related developments also added to demand.

Gold has already delivered a 28% year-to-date (YTD) return in 2025.

Domestic prices and currency effect

In India, domestic gold prices climbed 1.6% in August to ₹99,665 per 10 grams, marking a 31% YTD increase, the research highlighted.

The rupee’s weakness helped narrow domestic discounts from $27 per ounce in June to $3.7 per ounce by mid-August, bringing Indian prices closer to international benchmarks.

Festive season and jewellery demand

The study pointed out that the jewellery market remains optimistic ahead of the festive season. Manufacturers are restocking inventories and focusing on lighter-weight designs to meet demand while addressing affordability concerns.

This activity has also contributed to a surge in imports, which reached $4 billion in July.

Investment flows into ETFs

According to Aditya Birla Sun Life AMC, Gold ETF inflows remained strong at ₹1,260 crore in July, reflecting a 96% YTD increase in assets under management.

The firm attributed this to gold’s appeal as an inflation hedge and its negative correlation with risk assets, which supports its role as a portfolio diversifier.

Central bank position

The report further noted that the Reserve Bank of India’s gold reserves stayed steady at 880 tonnes, accounting for about 12% of its foreign exchange reserves.

Outlook

“Gold’s value retention, its role as an inflation hedge, and its negative correlation with risky assets continue to support its case as a portfolio diversifier,” Aditya Birla Sun Life AMC said.

With festive demand in India providing additional seasonal support, the near-term outlook remains firm, though developments in US monetary policy, rupee movement, and global risk sentiment will be key determinants.