Gold’s sharp correction appears to be changing how Indians buy the precious metal.
After falling nearly Rs 50,000 from its record high earlier this year, gold demand in the domestic market has dropped by more than 70%, with many households now choosing to sell old jewellery instead of making fresh purchases, according to the India Bullion and Jewellers Association (IBJA).
MCX gold was trading at around Rs 1,42,546 per 10 grams on Wednesday, more than Rs 50,000 below its all-time intraday high of Rs 1,92,991 touched earlier this year. Globally, spot gold slipped 0.6% to $3,981.69 an ounce after hitting a seven-month low in the previous session as expectations of higher US interest rates continued to weigh on bullion.
Surendra Mehta, Secretary of the India Bullion and Jewellers Association (IBJA), told Moneycontrol that gold demand in India has fallen by more than 70% after the government increased customs duty on gold from 6% to 15% in May.
Mehta also said demand has remained subdued after Prime Minister Narendra Modi appealed to citizens to postpone gold purchases for a year. The customs duty hike came two days after that appeal, according to the report.
HOUSEHOLDS ARE SELLING, NOT BUYING
The sharp fall in prices has prompted many households to monetise existing gold holdings rather than purchase new jewellery.
According to the Moneycontrol report, the sale of old gold jewellery during the April-June quarter is estimated to be close to 50 tonnes, more than 50% higher than the corresponding period last year.
Mehta said consumers and investors are selling gold in the open market amid fears that prices could fall further.
WHY HAS GOLD BEEN FALLING?
Gold has been under pressure globally as investors move away from safe-haven assets amid expectations that the US Federal Reserve will keep interest rates higher for longer.
Spot gold has slipped below the key $4,000-an-ounce mark and is headed for its fourth straight monthly decline, while this quarter is set to be the steepest quarterly fall since 2013. Higher interest-rate expectations have strengthened the US dollar, reducing the appeal of non-yielding assets such as gold.
According to Dr. Renisha Chainani, Head of Research at Augmont, gold has now declined for four consecutive weeks and is down nearly 30% from its January 2026 all-time high of $5,597 an ounce. She said a combination of a hawkish US Federal Reserve, elevated inflation and a stronger dollar has remained the biggest headwind for bullion.
Dr. Chainani noted that although the recent US-Iran conflict briefly boosted demand for safe-haven assets, the rise in crude oil prices shifted the market’s focus back to inflation and the possibility of further interest-rate hikes, limiting gold’s ability to recover.
WILL GOLD FALL FURTHER?
According to Dr. Chainani, investors should now closely watch key US economic data, particularly the non-farm payrolls report and manufacturing data, as these could influence expectations around future Federal Reserve policy.
She said a weaker labour market or softer inflation could help gold recover towards the $4,100-$4,150 range. However, a strong US jobs report could push prices back towards the crucial $4,000 support level.
In its latest daily bullion report, Augmont said gold has already broken below the important $4,000 level and is trading around $3,960. If this support fails, prices could decline further towards $3,600 (around Rs 1.30 lakh per 10 grams). However, given that the market is now in oversold territory, a short-term relief rally towards $4,100-$4,165 (roughly Rs 1.45 lakh-1.47 lakh) also remains possible.
WHAT SHOULD INVESTORS DO?
The nearly Rs 50,000 correction from record highs has made gold significantly cheaper than it was a few months ago.
However, experts advise investors not to rush into lump-sum buying simply because prices have corrected sharply.
The near-term direction of gold will largely depend on US interest rates, the strength of the dollar and developments in global geopolitics.
Investors looking to add gold to their portfolios may be better served by accumulating gradually rather than trying to predict the exact bottom.
