Indian Gold Consumption Drops 6% Amid Soaring Costs and Regulatory Pressure
Recent data from the World Gold Council reveals that heavy customs duties and record-high prices trimmed Indian gold demand to 131.4 tonnes this quarter. Despite lower volume, the total market value surged 50% as investors pivoted toward bars, coins, and ETFs.
Price Volatility and Policy Weigh on Jewelry Sales
India’s appetite for gold softened during the April-June quarter, with demand retreating to 131.4 tonnes from 139.7 tonnes a year prior. Data from the World Gold Council (WGC) indicates that jewelry sales took the hardest hit, falling 15% to 75.1 tonnes. Several factors converged to create this contraction: a quiet cultural season, high customs duties, and a public appeal from Prime Minister Narendra Modi for citizens to curb non-essential purchases to protect foreign exchange reserves.
While physical volume dipped 6%, the total value of demand showcased the metal's enduring grip on Indian wealth. Consumers spent ₹1,98,100 crore this quarter, a massive 50% jump from the ₹1,32,500 crore recorded in the same period of 2025. This disparity stems from a sharp spike in average prices, which climbed from ₹94,875.9 to ₹1,50,744.8 per unit (excluding duties and taxes) over the last twelve months. Internationally, gold averaged $4,506.3 an ounce, up from $3,280.4 last year.
Shift Toward Investment Portfolios
Despite the cooling jewelry market, Indian investors are increasingly viewing the metal as a strategic asset. Demand for gold bars and coins climbed 9% to 50.3 tonnes. In a significant contrast to global trends, Indian Gold ETFs saw net inflows of 4.2 tonnes, even as international markets experienced outflows. According to Sachin Jain, WGC Regional CEO for India, these patterns suggest that buyers are adapting to a high-price environment by prioritizing gold as a hedge against economic uncertainty.
Other supply-side indicators showed notable shifts:
- Imports: Total gold imports fell 23% to 98.1 tonnes compared to 127.4 tonnes in Q2 2025.
- Recycling: The volume of recycled gold dropped 17%, ending the quarter at 19.2 tonnes.
- Market Risks: Industry leaders expressed concern that current duty levels are incentivizing grey market activity and smuggling, which officials intend to monitor closely.
Outlook for the Second Half of 2026
The WGC maintains a cautious yet steady forecast for the remainder of the year. Annual demand is projected to land between 650 and 750 tonnes. Analysts anticipate that the upcoming festive and wedding seasons will provide the necessary momentum to reach the middle of that range. However, achieving the upper limit may depend on whether the government reduces customs duties or if global prices undergo a correction. While geopolitical tensions and inflation persist, the historical resilience of the Indian consumer remains a primary driver for the market's recovery.
Source: The Hindu — National
