India's most important gold consumption peak season of the year is approaching, but jewelers have not rushed to restock heavily.
As the world's second-largest gold consumer, India's gold demand remains weak, with some merchants waiting for prices to fall further before increasing purchases.
Samit Guha, CEO and Managing Director of MMTC-PAMP India Pvt., the country's largest precious metals refiner, said large jewelry chains that normally account for most gold sales have not yet fully returned to the market. Currently, purchasing activity is mainly driven by small and medium-sized jewelers, some of whom have already placed orders multiple times.
The wait-and-see sentiment among Indian gold buyers echoes the recent sharp decline in gold prices. Last week, international gold prices fell below $4,000 per ounce for the first time since July; since the outbreak of the U.S.-Iran war at the end of February, the cumulative decline in gold prices has widened to about 24%.
Guha explained that large jewelry manufacturers typically increase purchases when gold prices begin to rise, in order to lock in supply before prices climb further. If they expect prices to continue falling, these companies tend to reduce inventory.
India's weak gold demand is not driven solely by price expectations. In May, the Indian government raised the gold import tariff to 15%, more than double the previous rate. Indian Prime Minister Narendra Modi has also repeatedly called on citizens to reduce gold purchases to curb the widening trade deficit. India relies almost entirely on imports for its gold consumption, and the tariff increase has directly affected purchasing operations.
Guha said: "The increase in import tariffs has impacted our purchasing operations."
Higher import tariffs have also pushed more gold trading into the informal cash market.
While Indian demand faces pressure, the Chinese market has shown a different trend. As gold prices decline, Chinese households have recently increased gold purchases, contrasting with Indian buyers who continue to wait and see.
India's gold purchases are typically concentrated from October to December, mainly around Diwali. This year's Diwali is scheduled for November 8. With the peak season approaching, large jewelry chains have not yet fully resumed purchasing, weighing on India's gold demand outlook.
Citi Research expects that stricter gold import regulations, as well as abnormal monsoon conditions caused by El Niño that drag on rural demand, will suppress India's gold imports. The institution predicts that India's gold imports from October to December this year may be about 106 tons, only half of the historical fourth-quarter average of 212 tons.
MMTC-PAMP's sales also reflect that demand has not fully recovered. Guha said the company's gold sales volume remains below last year's level for the same period, with consumer demand mainly concentrated in smaller denominations of gold coins and bars. On a monthly basis, MMTC-PAMP's gold sales in September this year were roughly flat compared with the same period last year, while purchasing demand in October picked up slightly.
Guha said gold price movements will still affect buyers' timing for entering the market: "If gold prices rebound, we will see buying emerge."
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