Higher duty, weak demand weigh on India’s gold market

India's April-June gold demand dropped 6% to 131.4 tonnes, while consumption value surged 50% to a record ₹1.98 lakh crore

India's gold demand declined 6% year-on-year to 131.4 tonnes in the April-June quarter as elevated prices, weak seasonal demand and higher Customs duty curbed purchases, according to the World Gold Council's (WGC) Q2 2026 Gold Demand Trends report released on Thursday.

Total gold demand stood at 139.7 tonnes in the corresponding quarter last year. Despite the decline in volumes, the value of gold consumption surged 50% to a record ₹1,98,100 crore from ₹1,32,500 crore a year earlier, reflecting the sharp rise in domestic gold prices.

WGC Regional Chief Executive Officer for India, Sachin Jain, said consumers continued to view gold as an important store of wealth despite record prices.  He projected India's gold demand for 2026 at 650-750 tonnes, adding that demand is likely to settle around the middle of that range unless prices correct further and the government reduces Customs duty.

Jewellery demand dropped 15% to 75.1 tonnes during the quarter from 88.8 tonnes a year earlier. Jain attributed the decline to the seasonally weak period, higher import duty and Prime Minister Narendra Modi's appeal in May to reduce non-essential gold purchases to help contain the country's import bill.

Investment demand, however, remained resilient. Demand for gold bars and coins increased 9% year-on-year to 50.3 tonnes, while Indian gold exchange-traded funds attracted net inflows of 4.2 tonnes despite global ETF outflows. According to the WGC, these trends highlight gold's growing appeal as both a traditional store of wealth and a strategic investment during periods of economic uncertainty.

Jain also cautioned that the recent increase in Customs duty could encourage gold smuggling and the growth of the illicit market. He said the industry had already received reports indicating a rise in unauthorised gold flows and would monitor the situation closely in the coming quarters. The report noted that India's gold imports fell 23% to 98.1 tonnes in the April-June quarter from 127.4 tonnes a year earlier, while recycled gold supply declined 17% to 19.2 tonnes. 

Looking ahead, the WGC expects demand to receive support from the festive and wedding season in the second half of the year. 

However, persistently high prices are likely to continue influencing consumer buying patterns, even as long-term investment interest in the precious metal remains strong.