Gold Demand Improves Ahead Of Festive Season As Jewellery Buying Returns, Says World Gold Council

Jewellery buyers, exchange-traded fund (ETF) investors, and importers are returning to the gold market as prices recover from the steep fall in gold prices in June, according to the World Gold Council’s (WGC’s) latest India Gold Market Update. Demand for gold is improving ahead of the festive season, with bullion dealers stocking up in hopes of strong sales during Dhanteras and Diwali.

Gold futures on the Multi Commodity Exchange (MCX) were trading at Rs 1,58,294 per 10 grams, up Rs 289, or 0.19 per cent, from the previous close, as at 1.52 PM on August 20. Retail rates published by the India Bullion and Jewellers Association (IBJA) put 24 carat gold at Rs 15,676 per gram, 22 carat at Rs 14,417 per gram, 18 carat at Rs 11,804 per gram and 14 carat at Rs 9,207 per gram. Converted to the standard 10 gram unit, that puts 24 carat gold at roughly Rs 1,56,760 per 10 gram, broadly in line with where gold futures are trading.

Prices Claw Back June's Losses

Gold prices corrected sharply in June, held steady through July, and then rallied in early August to their highest level in more than two months, the WGC said. The London Bullion Market Association (LBMA) Gold Price PM, the international benchmark, climbed 9 per cent in the first two weeks of August to $4,391 an ounce, while domestic prices gained nearly 7 per cent to Rs 1,51,744 per 10 grams, as on August 14. Gold has firmed further since, with spot prices near $4,490 to $4,510 an ounce this week, according to bullion trackers JM Bullion.

The rupee’s appreciation against the dollar cushioned some of the international rally, limiting the rise in domestic prices, WGC said. Shifting expectations around US monetary policy, a weaker dollar and fresh inflows into gold ETFs drove the recovery, it added.

Discounts Shrink As Old Gold Funds New Purchases

Domestic prices are still running below import parity, suggesting that local supply remains comfortable. This is largely because jewellers are melting down old gold to make new pieces. WGC tracking of NCDEX data shows that the discount to landed cost narrowed from around $100 an ounce in mid-May and early June to about $45 an ounce by mid-August, though that is still wider than the average discount of $34 in July.

Jewellery demand has also strengthened, as buyers used the recent fall in gold prices as an opportunity to buy. Customers who had delayed purchases are returning to stores, while showroom visits have also increased. Buying is no longer limited to weddings, the WGC said.

Jewellery makers are also receiving more orders, while jewellers are increasing their stocks ahead of the festive season. This shows that the industry is more confident about sales during the festive period. Customers are also continuing to exchange old gold for new jewellery, helping support purchases, it added.

Physical investment demand also remained steady during the correction, as lower gold prices encouraged investors to buy. The recent recovery in prices has further improved investor interest in the yellow metal, WGC said.

ETF Money Keeps Flowing, Though Slower Than June

Gold ETFs kept attracting money in July, though at a slower pace compared to June. Data from the Association of Mutual Funds in India (Amfi) show net inflows of Rs 1,558.75 crore for the month, down 55 per cent from Rs 3,443.23 crore inflows in June, while holdings rose by a tonne to 120 tonnes. Total assets under management (AUM) climbed 2 per cent month-on-month (m-o-m) to Rs 1,73,300 crore. The first two weeks of August alone brought in an estimated Rs 1,179 crore of fresh inflows, the WGC said.

Investor participation widened, too. Another 57,071 new folios opened in July, taking the total count of gold ETF accounts to 12.53 million.

Futures Trading And Imports Pick Up

Trading on the MCX picked up in July after a soft April-June stretch. Average daily volumes rose to 14.90 tonnes from a three-month average of 13.50 tonnes, while average daily turnover rose 9 per cent m-o-m to Rs 214 billion ($2.2 billion). Activity is still well short of January’s peak, with volumes 59 per cent lower and 8 per cent below July 2025, though turnover was 35 per cent higher year-on-year (y-o-y), reflecting costlier gold rather than higher trading interest, WGC said.

According to the report, imports rebounded after two straight months of weakness, rising to $4.16 billion in July, more than double of $1.97 billion in June, while volumes jumped to 40-45 tonnes from just 20 tonnes in June. However, gold’s share of India’s total merchandise imports still stayed modest at 5 per cent, well below the 11 per cent average seen in January-March, WGC said.

Duty Hike Still Hangs Over the Market

This year’s correction began after the government raised the import duty on gold in May from 6 per cent to 15 per cent. This was the biggest single increase in duty so far, comprising a 10 per cent basic customs duty and a 5 per cent agriculture infrastructure and development cess.

The move came at a time when the rupee was falling to record lows and oil prices were rising amid tensions in West Asia. Prime Minister Narendra Modi had also urged people to avoid buying gold for a year to reduce pressure on the rupee. The WGC estimated that the higher duty could reduce India’s gold demand by 50-60 tonnes, or around 10 per cent, this year.

The report said that India’s gold demand remained under pressure in the first half of 2026, as high prices limited the growth in volumes. Total demand stood at 281.50 tonnes, up just 1.80 per cent from a year earlier. However, spending rose 72.50 per cent to around Rs 4.25 lakh crore, showing how gold prices had increased.

In the April-June quarter, India remained the world’s largest gold jewellery market, accounting for 27 per cent of global jewellery demand. However, overall gold demand fell by 6 per cent y-o-y to 131 tonnes. Despite the lower volume, spending reached a record Rs 1.98 lakh crore, according to separate WGC data.

High prices also changed buying patterns, the report further said. Consumers opted for lighter and lower-carat jewellery and made smaller and less frequent purchases. Many buyers also relied on old-gold exchange offers and instalment schemes to manage the higher cost, the report added.