India's Gold Demand Hits Six-Year Low Amid Record Prices and Import Duty

India's gold demand hit its lowest level in six years during the April-June quarter due to record-high prices, a steep increase in import duty, and a weak buying season. According to the World Gold Council (WGC), India consumed 131 tonnes of gold during the quarter, down 6% from a year earlier and 13% sequentially.

The volume was well below the long-term quarterly average of 188 tonnes, making it the weakest June quarter in six years. Despite this, elevated prices pushed the value of gold purchases to a record Rs 1,97,900 crore, up 35% year-on-year and 50% from the previous quarter.

Jewellery demand stood at 75 tonnes during the quarter, up 14% from the January-March period but 15% lower than a year earlier. Demand received an initial lift from Akshaya Tritiya, when Hindus and Jains consider it auspicious to buy gold, and the wedding season as gold prices eased from their first-quarter highs.

However, buying declined sharply after mid-May following the increase in import duty to 15%, the month-long inauspicious period for weddings, and the Prime Minister's appeal to curb gold purchases. Smuggling of gold increased after the surge in import duty, with the WGC attributing the slowdown to a pause in the gold price rally.

Investment demand also moderated after three consecutive strong quarters, falling to 54 tonnes from about 100 tonnes over the previous three quarters. The WGC attributed the slowdown to reduced momentum-driven buying due to a pause in the gold price rally.