Indias Gold Demand Drops 29% to 162.5 Tonnes in Q3 as Record Prices Squeeze Volumes
India's gold consumption fell sharply by 29% year-on-year during the July-September quarter (Q3) of 2026, totaling 162.5 tonnes compared to 229.8 tonnes in the corresponding period last year, according to the latest Gold Demand Trends report released by the World Gold Council (WGC).
The contraction was driven by record-high domestic bullion prices, higher customs tariffs, and a squeeze on rural disposable incomes. However, the sharp drop in physical volume masked an underlying resilience in spending. In value terms, overall gold demand actually increased by 3% to ₹2,41,900 crore (₹2.42 lakh crore) from ₹2,35,090 crore a year earlier, highlighting that Indian households committed equal or higher financial outlays despite securing lower tonnage.
Jewellery and Physical Investment Take a Hit
High volatility and elevated ticket sizes pushed retail consumers into a wait-and-watch mode across both ornamental and investment segments:
- Jewellery Demand: Consumption dropped 20% year-on-year to 99.9 tonnes compared to 125 tonnes in Q3 2025. In value terms, however, jewellery spending rose 16% to ₹1,48,700 crore. Retailers reported consumers opting for lower-carat ornaments, lighter grammage, and recycling older jewellery to manage household budgets.
- Bars and Coins: Physical investment demand dropped 40% to 55 tonnes from 91.6 tonnes in the same quarter last year. With domestic prices touching historic highs, retail investors deferred fresh purchases or chose to book profits on existing bullion holdings.
- Gold ETFs and Central Bank Buying: Gold ETF demand stood at 5.3 tonnes, down from 10.7 tonnes in Q3 2025, though cumulative domestic ETF holdings remained near 124 tonnes. Meanwhile, the Reserve Bank of India (RBI) paused its gold acquisitions during the quarter, recording nil purchases compared to 0.2 tonnes in Q3 2025.
Key Drivers Behind the Quarterly Slump
Major Headwinds Impacting Domestic Consumption:
- Elevated Domestic Prices: Domestic gold prices averaged ₹1,48,891 per 10 grams ($4,262 per troy ounce) during the quarter—a 45% jump compared to ₹1,02,287 per 10 grams ($3,457 per troy ounce) in the prior-year period.
- Import Tariffs and Macro Appeals: An effective customs duty structure of 15%—encompassing basic customs duty, the Agriculture Infrastructure and Development Cess (AIDC), and the Social Welfare Surcharge—kept landed costs elevated. Consumption was also tempered by official appeals urging households to limit non-essential discretionary foreign exchange expenditures.
- Rural Income Stress: Rural India accounts for over half of domestic gold consumption. Below-normal and patchy monsoon rainfall in key agricultural belts dented farm incomes, limiting post-harvest cash availability typically earmarked for bullion ahead of the festive season.
Full-Year Outlook
Sachin Jain, Chief Executive of the WGC’s Indian operations, indicated that full-year demand for 2026 is projected to fall to between 625 and 675 tonnes (averaging around 650 tonnes), which would mark a six-year low last witnessed during the pandemic-disrupted year of 2020.
While the fourth quarter is expected to see a seasonal pickup due to Dhanteras, Diwali, and the winter wedding calendar, analysts note that prevailing high price thresholds are likely to keep overall volume growth capped.
