WSJ writes in an article analysing why gold is at a 25-year high:
Jewelers use more than 70% of gold supplies every year. Italy long was the leading jewelry maker. Lately, lower-cost Turkey has taken a lot of business from Italy, and even-lower-cost India is taking some of Turkey’s business. The world’s biggest jewelry retail chain is Wal-Mart Stores Inc. But as a nation, India is the world’s largest gold-jewelry buyer.
In India and elsewhere in Asia, gold jewelry is used for dowries and major gifts. When people have extra savings, they buy jewelry, which can be sold either in times of need or when prices soar.
“We are selling old gold because the price is high,” said Hemani Shah, a customer recently in a Mumbai shop. “During the monsoons when the market goes down, we’ll buy.”