Gold Premiums Hit Decade High as Global Demand Defies Record Prices

Gold markets are witnessing a powerful divergence. While the global spot price for the precious metal soared to a historic high near $5,600 per 10 grams this week, local demand in key consumer nations is not just holding firm but accelerating. This surge has pushed the premiums paid for physical gold in major markets like India and China to their highest levels in over a decade, signaling a complex and robust appetite that appears undeterred by lofty prices.

Indian Market Braces for Policy Shift

In India, one of the world’s largest gold consumers, premiums have skyrocketed. The premium is the extra cost buyers pay over the international spot price, covering local costs like taxes, import duties, and dealer margins. Reports indicate this premium has reached a more than ten-year peak. The primary driver is strong investment demand from consumers and traders who are buying aggressively in anticipation of a potential hike in import duties. The Indian government sometimes adjusts gold duties to manage its current account deficit, and market participants are acting preemptively to secure stocks before any policy change makes the metal more expensive.

This activity highlights a key feature of the gold market: local policy and cultural factors can create demand surges that run counter to global price trends. For investors, the soaring Indian premium is a clear indicator of persistent underlying demand, suggesting that even at record global prices, gold’s role as a store of value and a staple for festivals and weddings remains deeply entrenched.

China’s Demand Shows Broad Strength

Meanwhile, in China, premiums have also jumped significantly. The reason here is a notable pickup in demand from both investors and jewellery buyers. This is particularly striking because it comes precisely as the global price benchmark hits unprecedented levels. Typically, such high prices would dampen consumer enthusiasm, but the current trend suggests other forces are at play.

Chinese demand is often viewed as a barometer for economic sentiment. The renewed interest in gold jewellery indicates consumer confidence and a willingness to spend on big-ticket items. Simultaneously, the investment demand points to a search for safe-haven assets. Investors in China may be turning to physical gold as a hedge against currency volatility, domestic economic uncertainties, or instability in other asset classes like the property sector. The willingness to pay a high premium underscores gold’s perceived value in this environment.

Context for Global Investors

For global investors, this dynamic creates a fascinating market picture. The record-high global price is being driven by a mix of macroeconomic factors, including central bank buying, geopolitical tensions, and expectations of interest rate cuts. However, the decadal-high premiums in Asia reveal that retail and institutional demand on the ground is adding substantial fuel to the rally. It is not just a speculative or fund-driven move.

This two-tiered market—with strong Western investment flows and unwavering Eastern physical demand—provides a powerful support floor for gold prices. It suggests the current rally has multiple pillars. While price corrections are always possible in any asset class, the intense physical buying in key consuming nations indicates a fundamental strength that goes beyond short-term trading. For investors watching the gold sector, the message from India and China is clear: demand remains resilient, and local markets are willing to pay up to secure the metal, creating a bullish undercurrent for the global bullion trade.