Indian Gold Demand Holds Firm Despite Government Appeals

Mike Maharrey

Prime Minister Narendra Modi urged Indians last spring to postpone gold purchases for a year. The appeal appears to have had little effect.

The gap between official appeals and consumer behavior matters because gold imports are a part of India's trade bill that policy can address directly through duties and public appeals, making household demand a swing factor in the pressure on the rupee.

Titan Company reported a 63 percent increase in profit in the second quarter, along with a notable rise in store foot traffic. The Financial Times reported that “jewelry accounts for the vast majority of the chain’s earnings.”

Modi has urged consumers to avoid gold as the government seeks to contain India’s trade deficit and ease pressure on the rupee. Gold and silver account for around 11 percent of India’s total imports, while oil represents approximately 22 percent.

A sudden rise in oil prices linked to the U.S.-Iran war has affected India particularly severely. The country imports nearly 85 percent of its fuel, and roughly 50 percent of its crude oil imports pass through the Strait of Hormuz.

With both oil and gold prices rising, India’s import bill has expanded sharply. The country’s merchandise trade deficit exceeded $330 billion in the financial year ending in March 2026, up from more than $280 billion a year earlier. The 17.9 percent increase has put significant downward pressure on the rupee.

In an effort to curb gold imports, the government raised customs duties from 6 percent to 15 percent in May, more than doubling the levy, at the same time Modi called on Indians to stop buying gold.

Ajoy Chawla, managing director of Titan, described the effects of those measures as “not long-lasting.”

“Their love for the product and gold is there; that is not disappearing. They are looking at it as a store of asset value. Even for a person who is not necessarily planning to sell their jewelry ever, they look at it as a portfolio,” Chawla said.

Subsequent data supported his assessment. After two consecutive weak months, gold imports doubled in July, rising from 20 tonnes in June to an estimated 40–45 tonnes. The increase indicated stronger demand. Monthly import readings have since served as a running gauge of whether the duty hike and appeals are gaining traction, with particular attention on demand ahead of the festive season, when purchases typically strengthen.

The World Gold Council (WGC) also reported improving Indian jewelry demand in July.

“Industry feedback suggests that deferred purchases returned to the market, resulting in higher footfall and a recovery in demand beyond essential wedding-related purchases. Manufacturers have reportedly begun receiving higher order flows, and inventory replenishment by jewelers has picked up ahead of the festive season, suggesting growing confidence in seasonal demand,” the WGC said.

According to WGC data, Indian jewelry sales rose by about one-third year on year to $21 billion in the second quarter. Indian jewelry merchants reported strong quarterly results, with revenue growth ranging from 30 percent to 60 percent year on year. Religious festivals and the summer wedding season supported gold jewelry sales during the quarter.

Modi reiterated his appeal the following week, asking Indians to avoid buying gold “if not necessary.” Demand data suggested that many consumers continued to regard purchases as necessary.

Gold holds both cultural and economic importance in India. The metal is deeply integrated into marriage ceremonies as well as religious and cultural rituals, and festival seasons typically increase demand.

Indian households also use gold as a store of wealth, particularly in poorer rural areas. Around two-thirds of India’s gold demand comes from outside urban centers, where many people operate outside the tax system. For many consumers, gold jewelry serves not only as adornment but also as a way to preserve wealth.

Where gold is generally viewed as a luxury item in the West, it is owned across income groups in India. According to a 2018 ICE360 survey, one in every two Indian households had purchased gold during the preceding five years. Overall, 87 percent of Indian households owned some gold. More than 75 percent of families in the bottom 10 percent of income had managed to buy the metal, the survey found.

Against that backdrop, the government’s efforts to reduce gold demand face significant cultural and economic factors. In May, Metals Focus predicted that the higher tax and government appeals would have only a limited effect on the Indian gold market because gold and silver demand in the country has historically remained resilient even in higher-tax environments.

Metals Focus analysts wrote, “Consumers often delay purchases initially following sharp price increases but typically adjust to higher price levels over time. In addition, elevated duties could encourage a recovery in unofficial flows, which had collapsed following the 2024 duty reduction.”

As the rupee depreciates, gold may become increasingly attractive to Indian consumers seeking to preserve wealth. Upcoming monthly import data and retailer earnings will show whether July's rebound extends through the festive season.