Gold prices in the Indian market are significantly diverging from those in the international market. Gold’s returns have moderated from the highs seen in early 2026. As of June 24, international gold prices are down 6% while domestic gold prices are up by nearly 16%, year-to-date, largely reflecting the 9% increase in import duty in mid-May, and the 5.37% depreciation in the INR against the US dollar.
The anticipated US Fed interest rate hikes or a higher-for-longer scenario are significantly diminishing gold’s appeal. As a non-yielding asset, gold’s opportunity cost increases, making dollar-denominated assets more attractive.
World Gold Council’s latest update on the Indian gold market provides interesting insights.
Firstly, the discounts on domestic prices have decreased from May’s highs. Secondly, there is a seasonal decline in demand for gold jewelry, and purchases of bars and coins are also slowing.
Thirdly, Indian gold ETFs experienced record outflows in May for profit-taking, but inflows picked up in June. Fourthly, digital gold purchases have decelerated, but they still exceed average levels. Finally, following the duty hike, gold imports have cooled but are still higher year-over-year.
Gold Price Discount
Immediately after the mid-May import duty hike, domestic gold prices fell to a significant discount compared to the official landed price. However, since the second week of June, these discounts have considerably narrowed.
Kavita Chacko, Research Head, India, World Gold Council, explains: This sharp widening reflected a demand-supply imbalance: higher domestic prices prompted profit-taking, boosting supply even as physical buying remained under pressure. Adding to the supply were two further factors — the likely offloading by bullion dealers who imported gold before the duty hike, and the inflow of old gold jewellery exchanged for new.
Gold price in India is about Rs 1,45,110 per ten grams 24 carat, while in the international market, gold trades around $4,000 per ounce.
Gold Demand
According to the report, price volatility has led consumers to adopt a cautious “wait-and-watch” strategy. There was subdued demand for gold jewellery through May and early June, impacted by both seasonal softness and an unfavorable Hindu calendar, resulting in reduced retail footfalls. Additionally, demand for bars and coins remained stagnant, and the pace of new store openings slowed, reflecting a moderate sentiment in the trade.
In response to this softening, retailers have focused on old-gold exchange transactions. “Anecdotal evidence suggests that the share of exchange business has risen between 5–15%, and for some retailers has accounted for as much as 60-70% of sales,” writes Kavita in the report.
Overall, market participants broadly expect demand to remain soft through June and July before improving from August onwards as the seasonal demand cycle kicks in.
ETF Demand
In May 2026, domestic gold ETFs experienced their first net outflow since April 2025, attributed to profit-taking after a 9% import duty hike that raised domestic gold and ETF prices. After the duty hike, gold prices in INR surged by about 6%, prompting some investors to book profits. However, by early June, inflows returned, with a net influx of INR 16.31 billion from June 1-11, indicating continued investor interest in gold ETFs.
By investor category, the Association of Mutual Funds of India (AMFI) data shows that as of March’26, corporates accounted for 58% of gold ETF AUM, followed by high-net-worth individuals (HNI) 31%, and retail 11%.
Falling Imports
India imports between 700 and 900 tonnes of gold annually, while the two-year monthly average is about 59 tonnes. “Against the backdrop of the sharp mid-May increase in import duties, gold imports declined 39% m/m to US$3.4bn, though they remained 34% higher y/y. In volume terms, we estimate imports to be in the range of 25–30t, notably lower than April’s 46t,” says Kavita.
Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or legal advice. Data and estimates cited are sourced from publicly available reports and expert statements. Readers are advised to consult a qualified financial advisor before making any investment decisions.
