SBI's new report on gold has come out, RBI reserves have increased, but demand has decreased; will gold become cheaper now?

News Topical, Digital Desk : Gold prices have surprised everyone in 2025. This year, gold prices have risen by more than 50%. This surge has pushed global prices close to $4,000 per ounce. Now, a report on gold has been released by the State Bank of India. A new SBI Research report, titled "Coming of (a Turbulent) Age: The Great Global Gold Rush," reveals that while the value of the Reserve Bank of India's (RBI) gold holdings has increased, domestic demand has declined sharply, and imports remain high. The government's liabilities under the Sovereign Gold Bond (SGB) scheme have increased significantly. According to the SBI report, global gold prices have increased by more than 50% year-on-year in 2025 due to persistent geopolitical tensions and a weakening US dollar. This price rally has increased the value of India's official gold reserves – now around 880 tonnes – by $27 billion in FY26, compared to a gain of $25 billion in FY25.

Consumer sentiment weakened

A report titled "Coming of (a Turbulent) Age: The Great Global Gold Rush" by the State Bank of India's Economic Research Department states that geopolitical tensions, economic uncertainty, and a weakening US dollar are driving gold prices to new heights. Prices have increased by more than 50% year-on-year in 2025. Prices briefly dipped below $4,000 per ounce in October, but rebounded to above $4,000 per ounce in November.

However, consumer sentiment has weakened. Citing data from the World Gold Council, the report states that gold demand in India declined 16% year-on-year in the third quarter of 2025, while jewelry sales fell by a massive 31%. Despite this slowdown, India remained the world's second-largest consumer of gold, with total demand of 802.8 tonnes in 2024, behind only China.

Imports continue to meet domestic supply shortfalls. Despite new reserves discovered in Odisha, Madhya Pradesh, and Andhra Pradesh, import dependence remained at 86% in 2024. Gold imports in April-September 2025 were $26.5 billion (₹2.2 lakh crore), slightly lower than $29 billion a year earlier.

86% comes from imports

The report states that domestic gold supply in India is only a small part of the total supply, with the World Gold Council estimating that imports will account for approximately 86% of the total supply by 2024. The report states that India is one of the largest gold markets, driven by cultural fondness for the shiny metal, investment demand, and other economic factors, including its status as a hedge against inflation and a safe-haven asset. The report, 'Coming of (A Turbulent) Age: The Great Global Gold Rush', by the Economic Research Department of the State Bank of India, states that due to the country's heavy dependence on gold imports, the price of gold also has a direct impact on the USD/INR exchange rate.

China's national policy will have an impact

The SBI study states that China has a national gold policy with a specific purpose. It aims to completely transform the way gold is traded, stored, valued, and used in international commerce. This represents a coordinated approach to simultaneously address multiple economic and geopolitical priorities.

Regarding India's gold policy, it states, "An objective view of the policy discussions on gold since 1978 reveals that the main focus has been on weaning people away from physical gold. Therefore, they were only for the short term."

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