Let’s talk Bullion! - Metals reshaping geoeconomics
- Aastha Gupta and Navya Nair
- Dec 25, 2025
- 7 min read
“Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”
Market Cycles and the Role of Bullion
The above quote by John Templeton rightly reflects the nature of the financial market. When fiat or paper money are not enough for the general public to have faith in, equity, derivatives & precious substances like gold and silver take the centre stage . The rising trend of demand and supply among the two metals reveals the undeniable influence that the bullion market has on global economics. Gold has always been the safe fallback for investors in dire times as has been proved recently when its price touched an all-time high at $4,379. Silver on the other hand is much more volatile than gold and not the usual choice of people for parking their excess funds. This piece will explore various dimensions of the global bullion trade and examine how India positions itself in the landscape of global market trade.
Gold: A Global Store of Value
It is often said that we Indians have a longstanding fascination with gold. The yellow metal can be found in nearly all aspects of our lives among many households across the country. The passion for gold is not confined to India but extends to the whole world. From the traditional utilization as jewelry gold has evolved as an instrument which is virtually traded as well as accumulated by many central banks as a token of wealth in form of reserves. The ubiquitous nature of the metal makes its presence seen in multiple sectors, for instance its application as an industrial metal & the electronics sector accounting for the largest source of demand. The countries producing the most gold are China, Peru, Australia with China accounting for nearly 10% of the global gold production. India being the net importer of gold items buys most of it from abroad. There are a number of implications of this action particular on the currency valuation, current account deficit (CAD) and the overall economy.
India is the largest market for silver because it is used both culturally and industrially. Silver is often called the “poor man’s gold” since it is more affordable than gold. Like gold, silver is used in many areas, starting from jewellery to electric vehicles and solar panels, making it important for technology and energy. Most of India’s silver is imported from countries like Mexico, Peru, and China. However, silver prices can change a lot because it is used for both investment and industry, the market is small, and investor sentiment plays a big role.
Trends in the Global Gold Market
Amid the topsy turvy state of geopolitics, gold prices have soared to unprecedented levels. Gold prices in the year 2015 were INR. 26,308 which over the past decade have reached almost INR. 94,876 in the second quarter of 2025. With it finally reaching a historic peak of INR. 1,32,294 in October this year. Uncertainty in global order remains one of the key factors in gold price surges as it serves as a safe haven for the investors when they desire to escape unpleasant losses which they might incur in the trading market.
The above chart illustrates the demand of gold at different points in the global economic cycle. While gold’s demand as jewellery & in fields of technology has gradually seen a dip in the last decade, the central banks’ accumulation & in addition to it, investors' movement toward the metal has seen tremendous growth. The gold prices have seen a steering growth in recent years as well. Gold, though not a perfect indicator of the geopolitical environment, often can be used to assess the situation, meaning sudden volatility in prices can suggest some large-scale event which leads to or eventually adds up to the fluctuations. The recent upsurge in the physically backed gold ETF AuM in regions of Asia, North America, Europe & globally is a direct response to recent global disorder.
In Asia it grew by YoY 79% rate, from 179.3 tonnes in 2024 to a whopping 320 tonnes in 2025 suggesting a positive inflow & momentum of investor’s money.
Gold’s resilience also makes it of importance to the RBI, which has gradually upped its gold purchase. The reserve stands at approximately 880 tonnes in 2025 indicating a growth of 3.5% from earlier 9% coming to a total 12.5% of the total foreign exchange reserve. A similar trend is also seen in China & Japan.
Economic Implications of Rising Gold Prices in India
1.) Currency valuation- stronger gold prices are often an indication of negative impact on Indian rupee, the reason being high import of gold. India acquires the majority of gold from abroad, and rising prices often means more outflow of the domestic currency
2) Dependency on foreign currency- As gold import payments are largely denominated in USD, it increases the demand for dollars further weakening the rupee against foreign currency. This can further up the burden on RBI to drain the foreign exchange reserve in order to balance the domestic rupee in the market.
3) Smuggling & illegal activity- When gold import becomes expensive, the government can impose import duties in order to protect the national market by curbing the demand for the metal, but a common repercussion of this action is the illegal ways through which people bring gold into the country as to not face the high duties so imposed.
4) ETFs inflow- Gold exchange traded funds have seen an overall positive growth with cumulative net inflow totalling to $250 million which indicates strong investors sentiment & growing confidence in the particular ETF.
5) Inflation- With a weakened rupee, higher & costlier imports can trigger import led inflation subsequently harming the local traders and consumers because of the high prices.
In the present context, Indian government’s policy reform of lowering the GST rates and the festive demand, can further lead to increased sales of gold items like jewellery, bars, coins etc.
Silver: The Affordable Alternative
The metal’s inherent volatility often prevents it from being the first choice for investors. Since its inception, silver has been a prominent substance in jewelleries & household utensils. But this trend discontinued when industrial demand for it increased rapidly. As time evolved many new sectors emerged where silver’s application got integrated in the workflow of many industries. The demand dynamics involves areas such as silverware, investment, ETPs, jewellery & industrial usage. According to The Silver Institute, on a global scale industrial demand for silver grew by YoY 4% while silverware and investment demands faced a decline. Silver jewellery attracts a stable & growing demand specifically in India considering the cultural significance.
Silver supply does not match demand. Most silver is produced as a by-product of mining other metals like zinc, lead, and copper, which as we can see limits how much silver can be supplied. For the past four years, demand for silver has been higher than its supply. This imbalance we could argue has attracted strong investor interest, seen in silver ETF inflows of INR 292 crores in September. As demand rose, the cost for new investors increased, leading to higher premiums. To protect investors, some silver ETFs have been temporarily suspended.
Trends in the Global Silver Market
The heightened consciousness regarding climate change encourages the use of sustainable energy and efforts on international level have morally obligated the nations to assimilate the use of renewable energy in order to safeguard the environment. This has a direct impact on use of solar panels to reduce the burden on traditional thermal energy. Silver being an excellent electrical conductor is used in solars to make them more efficient. Another environmentally friendly measure is the emergence of electronic vehicles which also consumes silver on a large scale. Another emerging and essential dynamic about silver is its accumulation by central banks. Unlike gold, silver was never treated as a reserve asset making this a paradigm shift following Russia’s strategic silver acquisition program, the first major sovereign commitment to silver in a very long time. This was followed by the Saudi Central Bank also making its first silver acquisition as a strategic investment. These actions signal a broader trend of economic diversification & potential attempt at de-dollarisation to lower dependence on western currencies.
Now the question remains how might silver influence the ongoing race for critical minerals? The U.S. has already proposed for it to be added to its list of critical minerals, citing its growing importance for national security and advanced technologies. We have been privy to the latest actions of China when it implemented export controls on its critical minerals & it being a major supplier of those minerals holds a sort of monopoly over them. Which puts the importing countries at the mercy of the exporting countries.
Bullion in India’s Long-Term Strategy
Taking into account the significance of the two metals, its suggested countries must pursue pragmatic acquisition strategies that balances resource security with economic stability. India does count as one of the largest markets for both gold and silver, continues to take a traditional approach towards silver. While gold reserves have accounted for growth, silver metal is yet to be counted as a reserve asset. Both metals are setting records in the international market though driven by economic instability, rising central banks demand is also an influencing factor. For India who is a net importer for both gold and silver, an intricately deliberated strategic acquisition and investment plan is crucial because gold acts as a leverage in the international market while silver underpins many emerging industries making them both metals critical to the country’s long-term economic and geopolitical strategy.
References-
Duncan Williams. (2024, February 16), Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria. Duncan Williams. https://www.dwassetmgmt.com/blog/bull-markets-are-born-on-pessimism-grow-on-skepticism-mature-on-optimism-and-die-on-euphoria
BusinessLine. (2025, September 10), Silver shines as ETF flows, central banks buying boost rally. BusinessLine.
Discovery Alert. (2025, September 18), Central Banks Increasingly Buying Silver. Discovery Alert.
The Silver Institute
World Gold Council
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