Gold Market Faces Mixed Signals Ahead Of India's Festive And Wedding Season, WGC Says

India’s gold market is heading into the festive and wedding season with investment demand holding up, even as sharp price swings have made jewellery buyers more cautious, according to the World Gold Council (WGC).

Gold prices had a strong run in August before giving back some of those gains in September. The LBMA Gold Price PM rose 13% in August to $4,386 an ounce, while domestic gold prices increased 12% to ₹1,58,854 per 10 grams. The rally was supported by investment flows and a weaker US dollar.

The momentum, however, eased in September. As of September 11, international gold prices were down 3.9% for the month, while domestic prices had fallen 4.6%. The WGC attributed the pullback to changing expectations around US Federal Reserve policy and softer global gold ETF flows.

Gold Investment Demand

India’s gold investment market continued to attract money in August, although the pace of new investor participation slowed. Gold ETF inflows rose 67% month-on-month to ₹2,597 crore, according to Association of Mutual Funds in India data. Holdings increased by 1.6 tonnes to 121.3 tonnes, taking assets under management to ₹1.91 lakh crore.

The rise in assets came even as new investor folios increased by only about 4,000 in August, compared with an average monthly addition of around 3.3 lakh between January and July. Profit-taking, weaker price momentum and restrictions around large direct subscriptions may have contributed to the slowdown.

Digital gold also continued to gain traction. Purchases averaged around ₹2,500 crore a month between June and August, equivalent to roughly 1.6 tonnes a month. August purchases were 110% higher than a year earlier, suggesting that some investors are increasingly using financial and digital forms of gold instead of physical metal.

Gold futures trading also picked up. Average daily turnover on the MCX rose 38% month-on-month in August to ₹29,500 crore, its highest level in five months. Average daily volumes increased 27% to around 19 tonnes. The WGC linked the rise to greater hedging and tactical trading, although turnover remained 48% below the January peak.

Gold Jewellery Demand And Imports

The physical jewellery market has been more subdued. Jewellery demand, which had strengthened in the run-up to the festive season from late August, has softened in recent weeks as the sharp August rally followed by the September correction pushed consumers into a wait-and-watch mode. Discretionary buyers are delaying purchases while waiting for greater price stability.

Retailers are also taking a cautious approach to inventory, preferring to replenish stocks based on realised demand. Some manufacturers have reported delays in orders from retailers, pointing to the impact of price volatility further along the jewellery supply chain.

Wedding-related demand, however, has remained relatively resilient. Buyers are increasingly shifting towards lighter-weight jewellery to manage the overall cost of purchases, while larger retailers have been responding with new product launches, promotions and a greater focus on faster-moving designs.

The jewellery trade is also dealing with higher hallmarking costs. The Bureau of Indian Standards raised the gold hallmarking fee to ₹75 per article from ₹45, effective September 14. The increase is relatively small compared with the value of gold and other jewellery costs, but comes at a time when consumers are already adjusting purchases because of elevated and volatile prices.

India’s gold imports also fell sharply in August. Imports stood at around $2.3 billion, down 45% from July and 58% from a year earlier. Gross import volumes were estimated at 15-20 tonnes, while gold’s share of merchandise imports fell to 3% from 9% a year earlier.

Domestic gold prices have also been trading below import parity. The WGC said the discount widened from $34 an ounce in July to $51 in August and $78 as of September 11, leaving domestic prices nearly 2% below the landed cost. Increased recycling through old-gold exchanges and the availability of unofficial supply have helped boost local availability, reducing the need for fresh imports.

Gold Market Outlook

The coming weeks will provide a clearer test of how Indian consumers respond to elevated gold prices. The WGC expects demand to improve as the festive and wedding season gathers pace, supported by steady investment demand and relatively resilient wedding buying.

At the same time, high prices and continued volatility could keep discretionary jewellery purchases under pressure. For the physical market, the combination of lighter jewellery, cautious retailer inventories and stronger recycling suggests consumers and the trade are adapting to a much higher gold-price environment rather than abandoning demand altogether.

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