Strong demand in an era of high prices: how key markets are reshaping gold and silver consumption

The precious metals market has entered an extraordinary phase where long-held assumptions about price ceilings and market behavior are being debunked. Gold rising past $5,600 per ounce on the London spot market and silver crossing the $119 mark represent milestones that few thought possible in the short term. Strong resistance well below these levels was expected to emerge, arguing that macroeconomic conditions, central bank policies and investor risk appetite could hold back any steep, sustained rally. Yet the market has once again demonstrated its ability to rewrite expectations in real time.

Forces a rewrite of the precious metals playbook

This dramatic breakout reflects a confluence of structural and cyclical forces that are steadily gaining momentum. Ongoing geopolitical tensions, changing currency dynamics and unprecedented liquidity injections by major central banks have significantly changed the investment landscape. Gold, traditionally seen as a barometer of global uncertainty, has responded to these pressures with an aggressive upward trajectory. Often overshadowed by its more illustrious counterpart, silver has not only followed the trend but has also posted percentage outperformance, fueled by both safe haven demand and robust industrial consumption coupled with green technologies and advanced manufacturing.

China continues its ruthless 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 interest remains strong as Chinese gold ETFs recorded four consecutive months of inflows in late 2025, with their holdings more than doubling to record levels. At the same time, the People’s Bank of China has maintained steady accumulation and added 27 tons of gold in 2025, signaling continued support from the official sector even as jewelry demand declined due to high prices.

The demand for silver has now increased even more sharply. Silver prices in Shanghai rose well above global benchmarks, with premiums reaching $9/oz, reflecting a large physical shortage. These pressures increased after China’s January 2026 export licensing regime restricted shipments of refined silver, shrinking domestic supply. Rapid expansion in silver-intensive industries continues to drive consumption, strengthening China’s resilient demand for precious metals even at unprecedented price levels.

Demand for precious metals in India remains stable despite record prices

India, one of the world’s largest buyers of gold and silver, continues to show resilient demand despite record high prices in early 2026. Domestic gold prices rose to ₹175,000 per 10 grams last week, but demand has remained steady as consumers have adapted by switching to lightweight and lower-purity jewelry rather than immediately reducing purchases. Essential purchases related to weddings, which tend to be price inelastic, have also supported demand for physical gold, preventing a sharp decline even at higher price levels. Investment demand also remains strong, with Indian gold ETFs seeing historic inflows in late 2025, reflecting increased interest in safe havens amid global uncertainty. Gold premiums in India have simultaneously risen to their highest level in a decade.

Meanwhile, demand for silver has increased dramatically, with consumption rising 192% year-on-year, positioning India as a consumer of around 25% of global silver supply, largely for solar, electronics and electric vehicle production.

Global demand is defying record price pressure

Despite record-breaking price levels in 2026, global demand for gold and silver has remained unexpectedly resilient. In major Western markets such as the US and Europe, investors are increasing their allocation 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 tons of gold per quarter, signaling long-term diversification away from the US dollar.

Demand for silver, meanwhile, is undergoing an even more dramatic transformation as industrial consumption surges in North America and Europe. Strong demand amid tightening global supplies and the downward trend in physical markets indicates that immediate demand for silver is now exceeding supply, creating continued upward pressure on prices.

The resilient demand outlook suggests that upward price momentum may continue

Despite gold and silver trading being at all-time highs, demand in major consuming countries remains firmly intact, with declines seen only in the ornament and jewelry segments, where price sensitivity is naturally higher. Investment-driven purchasing, central bank accumulation and intensifying industrial use continue to support strong global demand for both metals. The absence of meaningful demand erosion, even at record valuations, underlines the depth of investor conviction and highlights a structural shift in the way these metals are perceived: not just as traditional commodities, but as strategic assets that provide protection, diversification and long-term value. This resilient demand backdrop suggests that upward price momentum may continue, especially if macroeconomic uncertainties deepen or supply constraints further tighten, reinforcing the bullish outlook for gold and silver going forward.

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