India’s Gold Market Remains Resilient Despite Jewelry Slowdown and Slumping Imports

Despite a seasonal lull in gold jewelry demand and June gold imports falling to a 14-month low, the Indian gold market continues to hold steady, supported by strong retail earnings and growing investment demand, according to Kavita Chacko, Head of Research at the World Gold Council.

In her monthly report, Chacko noted that gold prices lost momentum by the end of June, recording only a marginal month-on-month increase of 0.3%.

She explained that prices were initially supported in early June by a weaker US dollar, rising geopolitical tensions, lower US Treasury yields, and positive inflows into gold-backed exchange-traded funds (ETFs). However, a shift in investor sentiment toward riskier assets curbed the precious metal’s gains.

Gold Shows Strong Performance Year-to-Date Despite Pressures

Gold prices have risen by 2% so far in July, fueled by renewed trade tensions, bringing the yellow metal’s year-to-date gains in 2025 to 28% in US dollar terms.

In the Indian market, gold ended June with a 0.7% monthly increase to ₹95,676 per 10 grams and continued its upward trend in July, rising by another 1% to ₹97,095.

Jewelry Demand Slows, While Investment Appetite Grows

Despite gold’s strong price performance, high prices weighed on jewelry demand. “Jewelry demand declined following the end of the wedding season and the onset of the seasonal lull in June and early July,” Chacko stated. “Higher prices also prompted consumers to defer discretionary purchases or shift toward more affordable alternatives such as lightweight, lower-karat, or gemstone-studded jewelry.”

Old jewelry exchanges also increased as a cost-saving measure, while investment demand for gold bars, coins, and simple chains—seen as semi-investment products due to their lower manufacturing costs—grew significantly, according to market reports.

Jewelry Companies Report Profit Growth Despite Lower Volumes

Although demand volume remained subdued, jewelry companies reported higher profits in the second quarter of the financial year. Major listed companies recorded annual revenue growth between 18% and 31%, driven by a 32% year-on-year increase in gold prices and seasonal demand during April and May.

Gemstone-studded jewelry also gained popularity as a response to high prices, while digital channels and franchise networks expanded significantly. Leading companies opened between two and 19 new stores during the quarter.

Gold ETFs Record Second-Highest Inflows Ever

June saw a surge in investment demand, with gold ETFs recording net inflows of ₹20.8 billion (approximately USD 242 million)—the second-highest monthly inflow on record—driven by escalating geopolitical tensions in the Middle East.

Total assets under management for Indian gold ETFs reached USD 7.5 billion, an 88% year-on-year increase, while holdings rose to 66.7 tonnes, including additions of 2 tonnes in June and 9 tonnes in the first half of 2025—marking the largest H1 increase on record.

Investor participation grew sharply, with 280,000 new accounts opened in June alone, up 27% from May and 41% year-on-year, pushing the total number of gold ETF accounts to 7.65 million. This underscores the growing importance of gold as a strategic asset in Indian portfolios.

RBI Resumes Gold Buying at Slower Pace

On the sovereign front, the Reserve Bank of India resumed gold purchases in June, adding 0.4 tonnes after a three-month pause, bringing official gold reserves to a record high of 880 tonnes.

However, RBI’s buying pace has slowed significantly in 2025, with only 3.8 tonnes added in the first half of the year—the lowest H1 addition in six years, compared to 37.1 tonnes in H1 2024. This likely reflects a more cautious approach in response to elevated global gold prices.

Nonetheless, gold’s share in India’s total foreign exchange reserves has risen to a record 12.1%, up from 8.7% a year earlier.

High Prices Drive Sharp Drop in Imports

Elevated prices also triggered a sharp decline in gold imports, which fell to their lowest level in 14 months in June, marking the third consecutive monthly drop.

Import values declined to USD 1.8 billion, down 26% year-on-year and 28% month-on-month. Estimated volumes ranged between 19 and 24 tonnes, compared to 31 tonnes in May.

Jewelry Demand Likely to Rebound Ahead of Festival Season

Chacko expects jewelry demand to rebound starting mid-August with the onset of the festive season. Meanwhile, investment demand is likely to remain strong in the coming weeks, supported by geopolitical uncertainty and rising prices of other asset classes.

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