Jewellers Delay Gold Purchases, Bet on Further Price Drops

India’s Festive Gold Demand Hinges on Whether Prices Have Further to Fall

Major jewellery chains are waiting for a clearer price signal, leaving smaller buyers to support a subdued market ahead of the peak season.

Large chains are waiting for prices to settle

The pullback in gold has not yet prompted a broad return by India’s largest jewellery buyers. Samit Guha, chief executive and managing director of MMTC-PAMP India, said major chains that usually account for much of the market’s sales have not fully resumed buying. Small and mid-sized jewellers have been more active, with some placing repeat orders.

That split reflects how inventory decisions can change with price expectations. Larger jewellers may increase purchases when prices rise, securing supply before costs climb further. When they expect prices to fall, they can instead rely on existing stocks and postpone replenishment. Their current caution therefore signals not simply an absence of demand, but a reluctance to commit while buyers think a better entry point may emerge.

Gold fell below $4,000 an ounce last week for the first time since July, extending its decline to about 24% since the US-Iran war began in late February. That followed a surge above $5,400 to a record in January. The scale of the reversal may attract buyers, but it has not yet persuaded large Indian chains that prices have bottomed. Guha said buying would return if gold rebounded.

Import costs and policy are weighing on demand

Price expectations are only part of the challenge. India imports nearly all the gold it consumes, making the market sensitive to changes in import costs and rules. The government more than doubled the import duty to 15% in May, and Guha said the increase had affected purchases. Prime Minister Narendra Modi has also repeatedly urged Indians to curb gold buying to contain the widening trade deficit.

The higher tariff has also shifted some buying into under-the-counter cash markets, complicating the picture of formal demand. Meanwhile, weaker rural demand following El Niño-driven monsoon disruptions is another expected constraint. Citi Research expects tighter import rules and softer rural demand to limit shipments: it estimates imports at about 106 tons from October through December, roughly half the historical fourth-quarter average of 212 tons.

The festive-season test is approaching

The timing matters because Indian gold purchases typically concentrate between October and December around Diwali, which falls on November 8 this year. A delayed buying cycle could leave the season more dependent on a late shift in prices or sentiment. But if large jewellers remain convinced that gold has further to fall, the seasonal calendar alone may not be enough to prompt substantial restocking.

The contrast with China, the world’s biggest gold consumer, is notable: household demand there has recently picked up as prices declined. In India, MMTC-PAMP’s sales remain below last year’s levels and demand is skewed toward smaller coins and bars. September sales were roughly flat year on year, while buying improved a little in October. Those figures point to selective activity rather than a broad-based revival.

Key Highlights

• Major Indian jewellery chains have yet to return fully to the gold market; smaller and mid-sized buyers are more active.
• Gold fell below $4,000 an ounce last week, extending its decline to about 24% since the US-Iran war began in late February.
• India’s import duty was raised to 15% in May, while higher tariffs have pushed some purchases into under-the-counter cash markets.
• Citi Research estimates fourth-quarter gold shipments at about 106 tons, against a historical average of 212 tons.
• MMTC-PAMP sales are below last year’s levels, with demand concentrated in smaller coins and bars.

Investor Note: The gold-demand outlook depends on whether prices stabilise enough to bring larger jewellers back, but tariff costs and weaker rural demand remain counterweights. Investors tracking the sector should distinguish a price-led pickup in buying from a durable recovery in underlying demand.