India's Gold Demand Projected at Lowest Level Since 2020

India's gold demand is forecasted to reach its lowest level in six years by 2026, primarily due to rising prices impacting jewellery sales and a decline in investment demand, according to the World Gold Council (WGC). The country, which ranks as the second-largest gold consumer globally after China, is facing challenges from increasing living costs exacerbated by geopolitical tensions, particularly following the Iran war. Additionally, a weak monsoon season is expected to further diminish rural demand for gold jewellery, which is traditionally viewed as a store of wealth.

In the first nine months of the current year, jewellery demand has already decreased significantly, leading to an overall projected demand of approximately 650 metric tons for 2026. This figure marks the lowest demand since 2020, a year when the COVID-19 pandemic led to the closure of jewellery shops across the nation. Sachin Jain, the CEO of WGC's Indian operations, reported that gold demand fell by 29% year-on-year to 162.5 metric tons in the September quarter, with jewellery purchases down by 20% and investment demand plummeting by 40%.

Despite the downturn, Jain noted that demand might see a rebound in the December quarter, driven by major festivals such as Diwali and the wedding season, which typically stimulate gold purchases. The auspicious nature of these occasions often leads to increased buying, especially during Dussehra in October and Diwali in early November. However, the WGC cautioned that high gold prices and the ongoing economic struggles in rural areas, stemming from a poor monsoon, are likely to suppress overall demand.

Rural regions account for more than half of India's gold consumption, where jewellery serves as a crucial form of wealth storage for millions. The monsoon season in 2026 recorded its lowest rainfall in over a decade, adversely affecting agricultural output and farmers' incomes, which could further limit their ability to purchase gold. Additionally, India's gold imports have declined in the September quarter, partly due to an increase in unofficial inflows following the government's decision to raise import duties on gold earlier this year, according to Jain.

Looking ahead, the WGC's report suggests that while there may be a temporary uplift in demand during the festive season, the long-term outlook remains uncertain due to persistent economic pressures. Stakeholders in the gold market will be closely monitoring these trends as they prepare for the upcoming months and assess the potential impact on future demand and pricing.