Gold jewelry demand in India has weakened sharply since January and the softness has continued into February. While retail purchases have slowed, investment demand remains strong: investors are favoring bars, coins and exchange-traded funds (ETFs), with ETFs posting record inflows in January.
The Reserve Bank of India has resumed gold purchases, adding about 2.8 tonnes to its sovereign reserves after a pause in December. At the same time, consumer behavior is changing: many buyers are opting to exchange old pieces for new designs or to sell existing holdings to lock in gains, rather than making fresh purchases.
Those shifts are creating pressure for retailers and the wholesale trade. Reduced retail turnover and increased selling have contributed to a liquidity squeeze in the industry, and domestic gold prices have moved to wider discounts versus international quotes — the gap expanded from roughly US$3 per ounce in December to about US$23 per ounce.
Looking forward, several factors are likely to keep jewelry demand under strain in the near term. Relatively high local gold prices and year-end financial obligations typically curb discretionary spending on ornaments. However, the start of the new fiscal year in April could ease some of that pressure if prices stabilize, potentially encouraging a pickup in purchases.
Overall, the market appears to be in a transitional phase: strong investment flows are coexisting with weaker retail demand, and structural changes in consumer preferences are reshaping how gold moves through the Indian market. For retailers and wholesalers, managing liquidity and adjusting to a greater volume of recycling and resale activity will be key challenges in the coming months.