India remains a top global gold market despite a 29% drop in volume to 162.5 tonnes during the September quarter. High prices and poor monsoons hurt rural buying power, causing jewellery and investment demand to slide. While the total value of demand rose due to price hikes, the market is heading toward a six-year low in annual consumption.
India maintained its position as a major global gold market, but the July–September 2026 quarter saw a significant cooling in physical demand. Consumption fell 29% year-on-year to 162.5 tonnes as consumers faced a combination of record-high prices and economic challenges. Although the volume of gold purchased dropped, the total value of demand rose 3% to ₹2,41,900 crore, reflecting the impact of the price surge over the past year.
Impact of High Prices and Weak Monsoons
The decline in demand was widespread across segments. Jewellery consumption, which traditionally forms the bulk of the market, fell 20% to 99.9 tonnes. Investment demand for bars and coins saw an even steeper decline of 40%, falling to 55 tonnes. The primary factor behind this trend is the steep rise in gold prices, which has made the metal significantly more expensive for retail buyers.
Additionally, the rural economy, which typically accounts for over half of India’s total gold demand, faced pressure due to poor monsoon rains in several regions. Reduced agricultural income directly limited the purchasing power of consumers in these areas, causing them to postpone or reduce gold purchases. These factors have led industry experts to project full-year 2026 demand to reach a six-year low, estimated between 625 and 675 tonnes.
Shifting Investment Trends and Regulatory Hurdles
While physical buying slowed, the financialization of gold continues to see interest. Assets Under Management (AUM) for Gold Exchange-Traded Funds (ETFs) reached ₹1.86 lakh crore across 26 schemes by the end of September 2026. Investors are increasingly using these instruments to maintain exposure to gold without the storage or purity concerns associated with physical bullion.
However, the path for financial investors has faced recent friction. On October 16, 2026, mutual fund houses paused fresh subscriptions to gold Fund of Funds (FoFs). While this decision limits new inflows into specific fund products, existing systematic investment plans (SIPs) and direct ETF investments remain active, preventing a total liquidity freeze.
For investors and the broader market, the key monitorables moving forward will be the stabilization of gold prices and the potential recovery of rural income levels. Any change in import duties or further regulatory adjustments regarding gold-linked investment products may also influence how consumers and investors allocate capital to the metal in the coming quarters.