Mumbai: India's gold demand is expected to fall to its lowest level in six years in 2026 as high prices and pressure on household incomes discourage jewellery purchases and physical gold investments. The World Gold Council (WGC) forecasts that annual demand will range between 625 and 675 tonnes, with a central estimate of around 650 tonnes.
The projected decline would mark India's weakest annual gold demand since 2020, when the coronavirus pandemic disrupted economic activity and affected jewellery purchases.
The latest figures show the extent of the slowdown. India's total gold demand fell by 29 per cent year on year to 162.5 tonnes in the third quarter of 2026, compared with 229.8 tonnes during the same period last year.
Jewellery demand declined by 20 per cent to 99.9 tonnes, while physical investment demand through gold bars and coins dropped by 40 per cent to 55 tonnes. The figures highlight the pressure on both household jewellery purchases and physical gold investments.
Sachin Jain, Regional CEO of the World Gold Council in India, has identified high prices and changing consumer behaviour as important factors affecting the market.
The average domestic gold price during the third quarter was approximately 45 per cent higher than in the corresponding period of 2025, based on rupee prices excluding import duty and GST. Although international gold prices subsequently corrected, domestic prices remained significantly higher than a year earlier.
Despite purchasing less gold, Indian consumers spent more money on the metal. The value of total gold demand increased by approximately 3 per cent during the third quarter to around Rs 2.42 lakh crore, compared with approximately Rs 2.35 lakh crore a year earlier.
The value of jewellery demand also increased by 16 per cent, even as the volume purchased fell by 20 per cent. This reflects the impact of higher prices, which have raised the cost of buying even relatively small quantities of gold.
Consumers are adjusting their buying habits in response. Many are choosing lighter jewellery, smaller items and lower carat ornaments to manage costs. Some buyers are also opting for studded jewellery rather than heavier gold pieces.
Demand for gold bars and coins has also weakened. However, financial investments linked to gold have shown a different trend. Indian gold exchange traded funds, commonly known as ETFs, continued to attract investor interest during the period, indicating that the decline in physical purchases has not affected every form of gold investment equally.
Government import policies have added another dimension to the market. In May 2026, India increased the customs duty on gold and silver imports from 6 per cent to 15 per cent as part of efforts to reduce imports and ease pressure on foreign exchange reserves.
India depends heavily on imported gold to meet domestic demand. Higher import duties can increase the cost of officially imported gold and widen the price difference between official and unofficial supply channels. This can encourage unofficial gold inflows into the country.
Recorded gold imports also declined sharply in September, reflecting changing market conditions and the impact of import restrictions. However, official import figures alone do not provide a complete picture of the country's gold consumption because unofficial inflows may not be included.
Rural economic conditions are another concern for the gold market. Rural consumers account for more than half of India's gold demand, making agricultural incomes an important influence on jewellery purchases.
India received below normal monsoon rainfall during the June to September season in 2026. The rainfall deficit has raised concerns about agricultural production and household earnings, particularly in areas that depend heavily on seasonal farming.
When agricultural incomes come under pressure, rural households may postpone jewellery purchases or reduce the quantity of gold they buy. This could further weaken demand during the remaining months of the year.
Higher household expenses have also added to the pressure. Rising energy and transportation costs following the Iran war have contributed to concerns about living costs, potentially leaving families with less money for purchases such as jewellery.
Despite the weaker demand during the first nine months of the year, there are signs of improvement as India enters its festive and wedding season.
October market assessments indicated better customer footfall and stronger jewellery orders as retailers prepared for Diwali and the wedding period. The correction in international gold prices during September also provided some relief to buyers.
However, the recovery remains uncertain. High domestic prices and pressure on household budgets could continue to limit the quantity of gold consumers are willing to purchase during the final quarter.
The slowdown in India is taking place alongside a strong international gold market. Global demand remained supported by investment through exchange traded funds and purchases by central banks during the third quarter of 2026.
The World Gold Council reported that global gold demand reached approximately 1,369 tonnes during the quarter. Central banks purchased around 321 tonnes, while global gold exchange traded funds recorded inflows of approximately 211 tonnes.
These developments show that the decline in Indian physical gold purchases is part of a wider market in which demand varies between consumers, investors and central banks.
The performance of the Indian gold market during the final quarter will be important in determining the country's annual demand. Although the festive and wedding seasons could provide some support, high prices, import costs and pressure on rural incomes are expected to remain significant challenges.