Domestic gold averaged ₹1,48,891 per 10 grams in Q3 2026, about 45% above a year earlier, as quarterly demand fell 29% to 162.5 tonnes.
NEW DELHI: India’s gold demand is heading for about 650 tonnes in 2026, the World Gold Council projects, the lowest since 2020. Third-quarter demand fell 29% to 162.5 tonnes from 229.8 tonnes a year earlier. Notably, the weakness is one of volume rather than value. Rupee spending on jewellery has risen even as tonnes have fallen.
Price, not appetite, sets the pace
Domestic gold averaged ₹1,48,891 per 10 grams in the third quarter, about 45% above a year earlier. A weaker rupee and a higher import duty lifted domestic prices faster than the international price of $4,262 an ounce, which rose 23.3%. Consequently, jewellery volumes fell 20% to 99.9 tonnes in the quarter and 18% over nine months. However, Sachin Jain, Chief Executive of the World Gold Council’s India operations, said high prices pushed buyers towards budget-capped purchases and exchange schemes. Meanwhile, shoppers moved from heavy 22-carat pieces to lighter 18-carat and 14-carat designs and studded jewellery. Likewise, old-gold exchanges accounted for a large share of retail volume. The pattern points to a household budget limit rather than a loss of affinity for the metal.
Investors lean towards paper and digital
Bars and coins drew 55 tonnes in the quarter, down 40% from a high base but up 9% from the second quarter. Total investment demand reached about 60 tonnes, which was 42% of the quarter’s demand. India still took 21% of global demand in the bar and coin category. Gold ETFs attracted net inflows of 5.3 tonnes, lifting holdings to 124 tonnes. Notably, digital gold purchases rose 76% over nine months to 16.3 tonnes, helped by UPI apps, low entry amounts and no making charges. Encouragingly, a mid-October pause on fresh lump-sum subscriptions to gold fund of funds did not disrupt liquidity, since direct ETF trades and SIPs continued.
Rural India waits on incomes
Rural areas generate over half of national demand, and this year’s monsoon was the weakest in more than a decade. Lower farm incomes capped purchases, and many rural buyers deferred non-essential buying or took gold loans. Moreover, households also held on to their jewellery. Recycled supply fell 12% to 19 tonnes despite record prices, as families expected further gains and preferred exchange schemes to cash sales. Furthermore, the council expects any December-quarter recovery to be limited, though festive buying and winter weddings traditionally lift it.
The duty hike and the external account
On 13 May the government raised the customs duty on gold from 6% to 15%. It was the largest single-step increase in India’s tariff history. The move followed a weaker rupee, which had touched ₹93.88 to the dollar in late March, and a wider trade gap. August imports fell 57.75% to $2.3 billion. That drop accounted for about one-third of the narrowing in the merchandise trade deficit to $26.86 billion from $31.98 billion in July. Encouragingly, the current account deficit stood at $4.2 billion, or 0.5% of GDP, in the first quarter of FY27. That compares with $13.2 billion in the third quarter of FY26. Cumulative April to August imports were still up 3.38% at $17.47 billion because importers front-loaded $5.6 billion in April. Meanwhile, domestic prices traded at discounts of up to $150 an ounce after the hike. The discount narrowed to $8 by mid-October.
Organised retail gains ground
Organised chains gained share. Titan reported 21% domestic jewellery revenue growth for July to September, while Kalyan Jewellers reported 27%. Higher realisation per gram, studded lines and trade-in offers helped both. Independent jewellers, however, face a harder market. National Secretary Surendra Mehta of the India Bullion and Jewellers Association reported a 70% fall in retail buying in the fortnight after the duty hike. The association also warned that the 15% rate could widen informal channels. Meanwhile, the Gem and Jewellery Export Promotion Council has asked for an overhaul of the Gold Monetisation Scheme to mobilise an estimated 25,000 tonnes of household gold.
What to watch
Several variables will shape the recovery. First, a price pullback below $4,000 an ounce, or towards ₹1,40,000 per 10 grams, could release deferred wedding purchases. Second, post-monsoon rabi sowing and rural wages will show whether villages can return to the market. Likewise, any duty recalibration in the Union Budget will weigh the current account against grey-market inflows. Furthermore, official figures may understate consumption, since unrecorded supply appears to have grown after the hike.
Indian households have not lost their taste for gold. They have changed how they buy it, towards lighter jewellery, exchange schemes and digital accounts. Encouragingly, wedding demand reflects deferral rather than destruction, so a steadier price could bring volume back. Meanwhile, the lower import bill has eased pressure on the external account. Ultimately, the next test is whether stability in prices and rural incomes arrives before the winter wedding calendar.
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