Indian Gold Demand Shrinks Amid Record Spending

India's gold demand saw a 6% decline in the second quarter compared to the same period last year, falling to 130.9 metric tons. Despite this drop, Indians spent a record ₹1.98 trillion on gold, with domestic prices rising by 59% due to a weaker rupee and increased import tariffs.

The World Gold Council reported that jewelry demand accounted for the largest share of purchases, with 75.1 metric tons sold in the quarter. This is up from 14% compared to the previous quarter but down 15% from the same period last year.

Investment demand, including bars, coins, and exchange-traded funds (ETFs), fell to 53.9 metric tons, a decline of 46% from the first quarter. However, total ETF holdings increased to 119 metric tons, with assets under management reaching ₹1.7 trillion.

The tariff increase has led to an incentive for smuggling, with World Gold Council India Chief Executive Sachin Jain stating that 'the arbitrage is so huge.' Enforcement agencies seized nearly twice as much gold in the second quarter compared to the previous one.