Strong demand in a high-price era: How key markets are reshaping gold & silver consumption

The precious metals market has entered an extraordinary phase, defying long-held assumptions about price ceilings and market behaviour. Gold soaring past $5600 an ounce in the London spot market and silver breaching the $119 mark represent milestones few believed achievable in the near term. There were expectations of a firm resistance well below these levels, arguing that macroeconomic conditions, central-bank policies, and investor risk appetite would cap any steep, sustained rally. Yet the market has once again demonstrated its ability to rewrite expectations in real time.

Forces Rewriting the Precious Metals Playbook

This dramatic breakout reflects a confluence of structural and cyclical forces that have been steadily gathering strength. Persistent geopolitical tensions, evolving currency dynamics, and unprecedented liquidity injections by major central banks have significantly altered the investment landscape. Gold, traditionally viewed as a barometer of global uncertainty, has responded to these pressures with an aggressive upward trajectory.

Silver, often overshadowed by its more illustrious counterpart, has not only followed the trend but has outperformed on a percentage basis, fuelled by both safe-haven demand and robust industrial consumption linked to green technologies and advanced manufacturing.

China Continue its Relentless Appetite for Precious Metals

China, the world’s largest consumer of physical precious metals, continues to show strong demand for both gold and silver despite historic price highs. Investor appetite remains firm as Chinese gold ETFs recorded four consecutive months of inflows in late 2025, with holdings more than doubling to record levels. At the same time, the People’s Bank of China has maintained steady accumulation, adding 27 tonnes of gold in 2025, signalling persistent official-sector support even as jewellery demand softened due to high prices.

Silver demand, meanwhile, has accelerated even more sharply. Shanghai silver prices rose far above global benchmarks, with premiums reaching $9/oz, reflecting a deep physical shortage. This strain intensified after China’s January 2026 export-licensing regime restricted refined-silver shipments, tightening domestic supply. Rapid expansion in silver-intensive industries continues to drive consumption, reinforcing China’s resilient precious-metals demand even at unprecedented price levels.

India’s Precious Metals Demand Holds Firm Despite Record Prices

India, one of the world’s largest consumers of gold and silver, continues to show resilient demand despite record-high prices in early 2026. Domestic gold prices climbed to ₹175,000 per 10g last week, yet demand has remained steady as consumers have adapted by shifting toward lightweight and lower-purity jewellery rather than reducing purchases outright. Essential wedding-related buying, which is typically price-inelastic, has also supported physical gold demand, preventing a sharp decline even at elevated price levels. Investment demand remains strong as well, with Indian gold ETFs recording historic inflows in late 2025, reflecting heightened safe-haven interest amid global uncertainty. Gold premiums in India have simultaneously surged to the highest in a decade.

Meanwhile, silver demand has expanded dramatically, with consumption soaring 192% year-on-year, positioning India as a consumer of roughly 25% of global silver supply, largely for solar, electronics, and EV manufacturing.

Global Demand Defies Record Price Pressures

Despite record-breaking price levels entering 2026, global demand for gold and silver has remained unexpectedly resilient. In major Western markets such as the US and Europe, investors are increasing allocations to gold as a hedge against inflation, geopolitical risks, and slowing growth. Central banks, especially in emerging markets, are reinforcing this momentum by purchasing an estimated 585 tonnes of gold per quarter, signalling a long-term diversification away from the US dollar.

Silver demand, meanwhile, is undergoing an even more dramatic transformation as industrial consumption surges across North America and Europe. Strong demand amid tightening global inventories and backwardation in physical markets indicates that immediate silver demand now exceeds supply, placing persistent upward pressure on prices.

Resilient demand outlook suggests upward price momentum may persist

Despite gold and silver trading at unprecedented highs, demand across major consuming nations remains firmly intact, with declines seen only in the ornament and jewellery segments, where price sensitivity is naturally higher. Investment-driven buying, central-bank accumulation, and intensifying industrial usage continue to underpin a strong global appetite for both metals. The absence of meaningful demand erosion, even at record valuations, underscores the depth of investor conviction and highlights a structural shift in how these metals are perceived: not merely as traditional commodities, but as strategic assets offering protection, diversification, and long-term value. This resilient demand backdrop suggests that upward price momentum may persist, especially if macroeconomic uncertainties deepen or supply constraints tighten further, reinforcing the bullish outlook for gold and silver going forward.

(The author is Head of Commodity Research, Geojit Investments Limited)