India Gold Demand Plummets Amid Higher Customs Duty and Modi's Appeal

India's gold demand saw a significant decline in the first quarter of this year, according to data from the World Gold Council (WGC). The country's gold consumption decreased by 6% year-on-year to 131.4 tonnes between April and June, down from 139.7 tonnes in the same period last year. This drop can be attributed to a combination of factors, including higher customs duty on gold imports and Prime Minister Narendra Modi's appeal to reduce non-essential gold purchases.

The government increased the import duty of gold and silver from 6% to 15% in May this year, leading to higher prices for consumers. Despite the price increase, demand for gold did not entirely dwindle. In fact, gold worth 50% more was purchased by value in the first quarter compared to last year, with a total value of ₹1,98,100 crore. This indicates that consumers are adapting to the higher prices and finding ways to continue purchasing gold.

However, jewelry demand did suffer a decline of 15% to 75.1 tonnes during this period. Investment demand remained encouraging, with an increase in demand for bars and coins by 9% to 50.3 tonnes. Indian Gold ETFs also saw an inflow of 4.2 tonnes despite global outflows.