World Gold Council: The Indian Gold Market is Accelerating

International gold prices climbed 9% in the first two weeks of August, according to the World Gold Council’s latest India market update. Domestic Indian prices followed suit, gaining nearly 7% over the same period, though the rupee’s appreciation against the US dollar softened the impact for Indian buyers. The move marks a recovery from June’s sharp correction and a subsequent stabilization in July, with prices now at their highest levels in more than two months. The report points to shifting monetary policy expectations, a weaker dollar, and renewed inflows into gold ETFs (exchange-traded funds) as the main drivers behind the rebound.

The renewed rally in India arrives as gold continues to test fresh highs globally, with Monday’s session showing an intraday peak of $4,667.00 per ounce and a trading range of $29.40, a level of volatility that has become increasingly familiar even as officials in the United States and elsewhere maintain that inflation remains under control. That messaging has drawn skepticism in recent weeks, and India’s gold market appears to be responding to many of the same undercurrents, including uncertainty over central bank policy paths and a broader search for stores of value outside traditional currencies.

Domestic Indian gold has continued trading below international import parity, though the gap has narrowed considerably. The discount stood at roughly $100 per ounce back in mid-May and early June, but had shrunk to about $45 per ounce by mid-August, still above July’s average discount of $34. Market participants attribute part of this narrowing to a pickup in “old gold for new” jewelry exchanges, which has added to local supply and helped keep domestic prices from fully catching up to international levels, a dynamic not unlike the delivery volumes seen elsewhere in physical metals markets. 

Investment flows tell a similar story of renewed, if uneven, appetite for gold. Indian gold ETFs saw net inflows of INR15.6 billion (US$163 million) in July, down 55% from June, though total ETF holdings still rose by 1 tonne to 120 tonnes, with assets under management climbing 2% to INR1,733 billion (US$18.1 billion), a scale of capital movement that echoes the sums seen in recent government borrowing. Early August data suggests inflows have picked back up, with an estimated INR11.79 billion (US$124 million) added in the first two weeks of the month alone. The number of investor accounts grew by 57,000 in July to reach 12.53 million, while trading activity on the Multi Commodity Exchange of India also increased, even as volumes remained well below January’s peak, a period that also coincided with broader labor market strain.

Taken together, the data suggest that Indian buyers, like investors elsewhere, are recalibrating their gold exposure as confidence in official inflation narratives continues to be tested, even as Americans, the Fed, and bond markets appear to be converging on a similar read of the inflation outlook.