Gold demand in India seen falling as prices surge, investment buying rises

India’s gold consumption is expected to fall to 650-700 tonnes this year from 802.8 tonnes in 2024 after a price surge crimped demand in one of the world’s biggest bullion markets.Gold prices have rallied more than 65% since January. The yellow metal’s retail price was at Rs 1,32,394 per 10 gm as of Friday.

“Despite elevated prices, consumers are continuing to favour 22 karat lightweight plain gold jewellery rather than switching to lower karat alternatives such as 18 karat, 14 karat and 9 karat, even as the government introduced hallmarking facilities for those products,” said Sachin Jain, CEO of the World Gold Council (WGC) India. “Indians will take time to shift to lower karat gold jewellery.”

Gold demand in the country continues to show divergent trends—sustained strength in investment demand contrasts with weakness in the jewellery segment. “Feedback from industry stakeholders, mainly manufacturers and retailers, indicates that gold jewellery volumes are lower year-on-year despite the wedding season, as higher prices and affordability are weighing on consumption,” said Jain.

India’s total gold consumption was at 462.4 tonnes during January-September, according to WGC data.Total gold imports reached $55 billion year-to-date, a 2% increase over the previous year. However, by volume, imports declined about 20% to around 580 million tonnes, making the value increase purely a factor of higher prices.“While value growth remains positive due to higher prices, volumes – particularly in the mid- and small-ticket segments that underpin mass demand remain pressured,” said Jain.Interestingly, high net-worth individuals (HNIs) bought heavy gold items, weighing 100-400 gms per piece, lured by the continued rally in prices. However, the higher volume offtake by HNIs was insufficient to offset the broader volume weakness.

Price volatility is further constraining discretionary, as well as everyday wear jewellery purchases. This divergence is also evident across the retail landscape.

Large and medium-sized jewellers are continuing to post relatively healthy sales, supported by higher ticket prices and need-based wedding purchases. However, small and standalone jewellers are under pressure, according to Jain.

Meanwhile, demand for gold investment products, particularly bars and coins, remains strong.

The preference towards investment-focused buying is reflected in the volume of gold imports, which rose sharply to 340 tonnes between July and October, from 204 tonnes between January and June.

“We have seen entry-level consumers buying gold coins as the continuous rally in prices have prompted them to enter the market,” said Jain.