Gold Demand in India Slumps as Elevated Prices Dampen Festive Buying Enthusiasm

Gold prices in India have shown modest demand this week as high domestic prices have dampened retail purchases ahead of the Akshaya Tritiya festival. Currently, domestic prices are around ₹1,53,200 per 10 grams but had peaked earlier in the week at ₹1,55,065, marking the highest levels in a month. Dealers have reported discounts of up to $4 an ounce due to muted retail interest, although some premiums of $14 an ounce were noted, highlighting festival-related demand intertwined with import levies.

The underlying causes for this price movement can be attributed to several factors, including elevated domestic prices and a halt in imports by Indian banks, which has left a significant quantity of gold at customs. The government has yet to issue formal orders for bullion imports, creating a supply bottleneck. Additionally, the retail sentiment has been hampered by high pricing, leading to weak demand, even as the Akshaya Tritiya festival approaches—typically a time of increased purchasing. In contrast, in China, premiums have remained steady, albeit low, reflecting similarly subdued demand, with central bank activities providing some support but often tapering off during this season.

For traders and investors, the short-term outlook suggests cautious positioning. With the combination of high domestic prices and logistical delays from import disruptions, there may be limited upside in retail demand for gold in India until these issues are resolved. Furthermore, given the seasonal trends in China, where central bank buying could stall in the coming quarter, market participants should prepare for possible fluctuations in premiums and demand dynamics. The upcoming festival could see a slight uptick in purchases, but the prevailing headwinds may temper any substantial recovery in gold prices.

Source: Market Source

(Expert Note: This report was independently prepared by the Wealthova Commodities team.)