Central banks around the world have been buying large amounts of gold in recent years, and this has had a noticeable impact on the price of gold. When central banks increase their gold reserves, they create higher demand for the metal, which pushes prices up. This rise in gold prices then affects other markets that rely on gold, including the jewelry industry.
Gold is often seen as a safe asset during times of uncertainty like economic crises or geopolitical tensions. Central banks buy it to protect their financial stability and diversify their reserves. Over the past few years, central bank purchases have been very strong—more than 1,000 tonnes annually—leading to a steady increase in gold prices. For example, in 2024 and 2025 alone, the price per troy ounce rose above $3,000 and increased by over 40% since early 2024.
This surge in price makes raw material costs higher for jewelers who use gold to craft jewelry pieces. As a result, jewelry becomes more expensive for consumers because jewelers pass on some or all of these increased costs to buyers.
In countries with high cultural demand for gold jewelry like India, this effect is quite visible. Retail customers tend to slow down their buying when prices soar because expensive jewelry can be less affordable or less attractive during such times. Instead of purchasing new pieces outright with cash or income savings, many people now trade old gold items as currency toward new purchases—a practice that has grown significantly due to high prices.
Despite retail demand softening somewhat due to rising costs from central bank-driven price increases, overall global demand remains strong because institutional buyers continue accumulating large quantities of bullion for reserve purposes.
In summary:
– Central bank buying raises global demand for physical gold.
– Increased demand drives up market prices.
– Higher market prices raise raw material costs for jewelers.
– Jewelry retail sales may slow as consumers face higher prices.
– Consumers adapt by trading old jewelry rather than buying fresh stock outright.
Thus, central bank activity indirectly but powerfully influences how much people pay when they buy gold jewelry by shaping supply-demand dynamics and pushing up underlying bullion costs worldwide.