Changing Trends in the Gold Market

India's gold demand dropped to 131.4 tonnes during the second quarter (Q2) ending June, marking the lowest level in six years, according to the World Gold Council (WGC). Gold demand declined by 6% compared to the same period last year. The WGC attributed the slowdown to the government's decision to increase import duty on gold from 6% to 15% in May, weak seasonal demand, and Prime Minister Narendra Modi's appeal to avoid non-essential gold purchases to conserve foreign exchange.

Despite the decline in volume, the value of gold sales reached a record ₹1.98 lakh crore, up 50% year-on-year. WGC India Regional CEO Sachin Jain said consumers continued buying gold despite higher prices. The council expects India's annual gold demand to remain between 650 and 750 tonnes, with demand potentially rising if prices ease and import duties are reduced.

The WGC also noted a sharp increase in gold smuggling following the import duty hike, citing higher profit margins for smugglers. Gold seizures nearly doubled between May 13 and June-end compared to the same period last year. While jewellery demand declined to 75.1 tonnes, investment demand rose 9% to 50.3 tonnes, and Gold ETFs attracted fresh inflows. The council expects festive and wedding season demand to improve during the second half of the year.