Indian gold consumption fell to 131 tonnes in the June quarter as high prices and import duty hikes deterred jewellery buyers. While demand volume in tonnes declined, the total financial value surged 50% to ₹1.98 lakh crore. Investors should monitor how elevated inventory levels and shifting consumer preferences for gold-backed financial instruments impact future sector performance.
Indian gold demand faced significant pressure in the June quarter of 2026, with total consumption falling 6% year-on-year to 131 tonnes. The decline was largely driven by a sharp 15% drop in jewellery demand, which fell to 75 tonnes, marking one of the lowest levels in nearly two decades. Market trends suggest that consumers are increasingly cautious, choosing to postpone non-essential purchases as gold prices remain approximately 59% higher than the previous year.
Impact of Price Volatility and Policy Changes
The gold market encountered multiple challenges this quarter. A 9% hike in import duty combined with persistent price volatility acted as a strong deterrent for retail buyers. Beyond the direct market costs, industry observers have noted that shifts in consumer sentiment, including social and economic factors, have played a role in softening physical jewellery sales. Jewellers are now grappling with rising inventory levels, which have reached 21 tonnes—a figure that sits well above the 13-year average. This accumulation of unsold stock can put pressure on the working capital of major jewellery retail chains if demand does not recover in the coming quarters.
Divergent Trends in Investment Gold
While physical jewellery demand weakened, the investment segment showed mixed results. Gold bars and coins saw a 9% rise in demand, reaching 50 tonnes, suggesting that some investors continue to view gold as a long-term asset despite the price rally. Additionally, investments through Gold Exchange Traded Funds (ETFs) increased 62% on a year-on-year basis, totaling 4 tonnes. However, this growth in ETFs cooled significantly compared to the previous quarter, indicating a potential plateau in institutional and retail interest at current price points.
Supply Constraints and Consumer Behavior
The total supply of gold in India touched a six-year low of 120 tonnes. Net bullion imports saw a notable decline of 22%, falling to 98 tonnes. Interestingly, recycling of gold—where consumers sell their old jewellery for cash—dropped 17% to 19 tonnes, hitting an 11-quarter low. This behavior indicates that households are holding onto their physical assets rather than liquidating them for cash, even with prices at elevated levels. Many consumers appear to be turning to gold loans as a way to access liquidity without having to surrender their gold holdings permanently.
Moving forward, the primary monitorables for the sector will be the trend in import volumes and whether jewellery retailers can normalize their inventory levels. Investors in the jewellery and precious metals sector will also track whether price stabilization or upcoming festive seasons can revive volume growth, or if the trend of value-over-volume will persist.