Retail buyers in India are opting to exchange old gold jewellery for new, rather than making fresh purchases, at a time when gold prices are skyrocketing, World Gold Council (WGC) said in its latest India gold market update.
“Additionally, as gold prices surged past previous thresholds, many consumers are also taking the opportunity to sell old gold and lock in profits,” WGC’s India gold market update read.
The record-breaking surge in gold prices has dimmed the appeal of the retail jewellery demand. The drop in gold imports in January also indicates the pullback in demand.
This slowdown in jewellery demand has left retailers reluctant to restock, as they face challenges in meeting payment terms with manufacturers.
“This has created a liquidity crunch within the industry. The subdued demand environment was reflected in the widening spread between domestic and international prices. Since December, domestic gold prices have been trading at a discount to international prices, with the gap widening from an average of USD 3 per ounce in December to USD 23 per ounce,” said the WGC report.
Notwithstanding the depressed jewellery demand, investment demand interest (for bars and coins) has stayed the course, with investors anticipating further price increases, it asserted.
Amid uncertainty in stock markets, wealthy investors are parking their money in gold ETFs rather than buying physical gold. 2025 saw a strong interest in gold ETFs, marked by unprecedented inflows in January.
Quoting the Association of Mutual Funds in India (AMFI), WGC said gold ETFs recorded net inflows of Rs 37.5 billion (USD 435 million) in January, significantly higher than the average inflows of Rs 9.4 billion (USD 112 million) over the previous 12 months.
“Anecdotal reports suggest that the strong inflows in January can be attributed to investors redirecting free cash flow towards gold ETFs for diversification amid ongoing global and domestic economic and policy uncertainty. The sustained weakness in the domestic equity markets has also been driving flows into gold ETFs, with investors pulling back from equities in favour of the safe-haven appeal of gold,” said WGC.
“In February, a new product was launched, bringing the total number of gold ETFs in India to 19, highlighting the strong momentum in this space.”
Wedding-related purchases, too, have been subdued, suggesting that many consumers had front-loaded their purchases when prices dipped in November.
Investment interest in gold is expected to remain strong, even as record-high prices pressure jewellery demand.
“The financial year-end dynamics, which include statutory payments and tax-saving investments, may curtail discretionary spending, further weighing down demand,” it said. (ANI)
