Domestic gold demand has fallen more than 70% after prices dropped nearly ₹50,000 from the all-time highs touched earlier this year, according to data from the India Bullion and Jewellers Association.
On Thursday (July 2), gold futures on the Multi Commodity Exchange (MCX) slipped another ₹166 to ₹1.44 lakh per 10 grams for August delivery, reflecting continued weakness in domestic spot demand.
The decline marks a sharp reversal from the record intraday high of ₹1.92 lakh per 10 grams seen earlier this year. Internationally, gold futures were trading near $4,072 an ounce in New York.
Households prefer selling over buying
Instead of viewing the correction as a buying opportunity, many households are monetising existing holdings.
According to a Moneycontrol report, nearly 50 tonnes of old gold jewellery was sold back into the market during the April–June quarter, more than 50% higher than the year-ago period.
The trend suggests consumers remain cautious despite the steep correction, particularly after gold’s strong rally over the past year encouraged many families to lock in profits.
Why buyers are staying away
Analysts say several factors are keeping retail demand subdued.
Globally, gold prices have come under pressure as investors reduce exposure to safe-haven assets amid expectations that the US Federal Reserve could keep interest rates elevated for longer. Higher rates strengthen the dollar and reduce the appeal of non-yielding assets such as gold.
At the same time, uncertainty over where prices may stabilise is making buyers hesitant.
Bullion platform Augmont said in a recent market note that gold could decline further toward $3,600 an ounce if key support levels break, though an oversold market could also trigger a short-term rebound.
Some market participants also believe policy risks could weigh on returns.
S Naren, Executive Director and CIO at ICICI Prudential AMC, recently cautioned against excessive exposure to precious metals after the sharp rally earlier this year. He said investors who rushed into gold exchange-traded funds ignored asset-allocation principles and later faced losses as prices corrected.
Naren added that while gold remains useful for diversification, he prefers exposure through multi-asset funds rather than standalone gold investments. He also warned that any reduction in the current 15% customs duty on gold imports could pressure domestic prices further.
Correction has improved affordability, but sentiment remains weak
While the correction has made gold significantly cheaper than it was a few months ago, consumer sentiment has not improved proportionately.
Many buyers are waiting for signs that prices have stabilised before returning to the market, especially after the sharp volatility seen this year.
For now, uncertainty around US interest rates, global economic conditions and the direction of the dollar continues to keep retail gold demand under pressure, even after one of the steepest declines in recent years.
