Gold prices experienced dramatic swings ahead of India's peak festive season, with the LBMA Gold Price PM rising 13% in August to US$4,386 per ounce while domestic prices climbed 12% to ₹1,58,854 per 10 grams. According to the World Gold Council's latest report titled 'India Gold Market Update, Cautious Festive Optimism', the rally was attributed to strong investment flows and a softer US dollar. However, momentum did not carry into September, with international gold prices falling 3.9% and domestic prices down 4.6% as of September 11, driven by changing expectations around US Federal Reserve policy and softer global gold ETF flows. Discounts widened significantly from an average of USD 34 per ounce in July to USD 51 in August and further to USD 78 as of September 11, leaving domestic prices trading nearly 2% below import parity. The sharp price volatility has prompted many consumers to delay discretionary purchases while waiting for greater price stability. Latest developments show spot gold rose 1.2% to $4,312.05 per ounce after touching a near six-week low, indicating that the prior sell-off had already priced in much of the tightening risk, creating a contrarian opportunity as bearish positions were closed.
Gold sales have declined by 15% year-on-year in volume terms during this year's Ganesh Chaturthi, with consumers either reducing the quantity they bought or opting for lighter jewellery as sharp increases in gold prices made purchases more expensive. In Mumbai's spot market on Monday, gold was trading at ₹1.57 lakh per 10 grams, including 3% goods and services tax, which was around 60% higher than the ₹98,000 per 10 grams recorded on Ganesh Chaturthi last year. According to Surendra Mehta, national secretary of India Bullion & Jewellers Association, domestic gold prices have remained at historic highs, impacting volume sales, but overall the mood remains optimistic with many people resorting to old gold jewellery exchanges to buy new jewellery, which is mostly lightweight. Wedding-related demand has remained comparatively resilient, with the World Gold Council noting signs of a structural shift towards lighter-weight jewellery to help buyers manage high gold price impacts. This represents the most immediate impact for households, with families potentially buying less gold, choosing lighter designs, or postponing non-essential purchases.
Gold ETFs continued attracting significant investment in August, with inflows rising 67% month-on-month to ₹2,597 crore according to Association of Mutual Funds in India data. ETF holdings increased by 1.6 tonnes during the month, taking cumulative holdings to 121.3 tonnes with assets under management reaching ₹1.91 lakh crore. However, the number of new investors showed notable moderation, with only 4,000 new folios added in August compared to the average monthly increase of 3.3 lakh folios from January to July. As per the World Gold Council, this suggests that while existing investors continue to accumulate gold through ETFs, the pace of new investor entry has slowed, reflecting periodic profit-taking and softer price momentum. Market participants report that physical investment demand remains steady, and some investors appear to be shifting from physical gold towards digital forms of gold.
Digital gold buying remained steady between June and August, averaging around ₹2,500 crore monthly with purchases averaging 1.6 tonnes per month. August purchases were 110% higher than the previous year, according to the World Gold Council. The appeal lies in allowing small-amount purchases without physical storage concerns, with some consumers moving from physical gold to digital forms. However, the convenience should not be confused with identical structure, costs, regulation, and risks compared to gold ETFs or physical gold.
India's gold futures market showed increased activity, with average daily turnover on the Multi-Commodity Exchange rising 38% month-on-month in August to ₹29,500 crore - the highest level in five months. Average daily volumes increased 27% to 19 tonnes, coinciding with the sharp gold price rally. India's gold imports fell sharply in August to US$2.3 billion, down 45% from July and 58% from a year earlier, with gross import volumes estimated at 15-20 tonnes. The World Gold Council noted that existing domestic supplies were sufficient to meet expected demand, with continued exchange of old gold for new jewellery increasing local supply and helping keep domestic gold prices below landed costs of imported gold. Gold's share of total merchandise imports eased to 3% compared to 9% a year earlier, while the availability of unofficial supply is cited as a contributing factor behind the widening discount. Retailers are being careful about building inventory, with some manufacturers reporting delayed orders and widened discounts indicating that demand and local supply conditions remain uneven.
The Bureau of Indian Standards (BIS) has increased hallmarking fees just before the start of the festive season, with the charge for gold articles rising from ₹45 to ₹75 per gold article. The fee for silver articles remains unchanged at ₹35 per silver article, with a minimum consignment charge of ₹150 for silver and ₹200 for gold. The change was notified through the BIS (Hallmarking) Amendment Regulations, 2026, dated September 14, 2026. Despite the challenging market conditions, jewellers remain hopeful that the moderation in demand will prove temporary as the festive calendar progresses towards the peak wedding season. Growing interest in coins and bars has been observed during this year's Ganesh Chaturthi, with Kumar Jain of Umedmal Tilokchand Zaveri noting that bullion sales in the form of coins and bars have shown traction, even though volumes remain below last year's level. Industry executives expect buying interest to gradually pick up as consumers and jewellery retailers prepare for the peak festive period.
