Yet, consumers continued to spend heavily on the precious metal, pushing the value of total gold demand to a record Rs 1.98 lakh crore ($21 billion), up 50% YoY from Rs 1.32 lakh crore in the same period of 2025, according to the World Gold Council's (WGC) Gold Demand Trends Q2 2026 report released on Thursday.

The fall in volumes reflected a price-driven adjustment rather than weaker consumer interest. Buyers adapted to gold prices, which rose nearly 60% YoY, by opting for lighter-weight, lower-carat and studded jewellery, while exchange programmes gained popularity. Demand was supported by Akshaya Tritiya and wedding purchases early in the quarter, before easing from mid-May following the import duty hike, the month-long inauspicious period for weddings and Prime Minister Narendra Modi's recent appeal to reduce gold imports.

"The decline in gold demand by volume, alongside a record value of demand, is largely a reflection of significantly higher prices rather than weaker consumer interest. During April-June 2026, the average domestic gold price rose nearly 59% YoY, from around Rs 95,011 to Rs 1,50,886 per 10 grams. As a result, though consumers purchased fewer grams of gold, the overall value of purchases reached a record high," said Saumil Gandhi, Senior Analyst - Commodities at HDFC Securities.

Gandhi added that domestic gold prices outperformed global prices during the quarter due to the rupee's depreciation and the government's decision to increase import duties in mid-May, which widened the gap between local and international prices. He reiterated that consumers adjusted by buying lighter jewellery, exchanging old ornaments and prioritising need-based purchases.

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Jewellery demand fell 15.4% YoY to 75.1 tonnes, compared with 88.8 tonnes a year ago, making it the second-lowest second-quarter jewellery demand since 2000, said WGC, which follows the calendar year. However, higher gold prices lifted the value of jewellery purchases by 34.4% to Rs 1.13 lakh crore ($12 billion) from Rs 84,200 crore in 2025. Retailers reported a 10-20% increase in exchange volumes, with exchange transactions accounting for as much as 70% of sales in some stores.

Despite lower volumes, India's gold appetite remained resilient globally. The country retained its position as the world's largest jewellery market during the quarter, accounting for 27% of global jewellery demand. Retailers also began building inventories towards the end of June, ahead of festive buying from late August.

Investment demand remained firm, with combined demand for gold bars, coins and exchange-traded funds (ETFs) at 54 tonnes. Bar and coin demand stood at 50 tonnes, 9% higher than a year earlier, taking first-half demand to its highest level in 13 years. ETF inflows moderated to 4 tonnes after a record first quarter, though first-half ETF demand reached an all-time high of 24 tonnes.

Total gold supply declined to 120 tonnes, the lowest level in six years, largely due to lower bullion imports. However, recycled gold and industry inventories ensured adequate availability.

Looking ahead, the WGC expects the festive and wedding season to support demand, though elevated prices could keep jewellery volumes under pressure. Gandhi said recent corrections in gold prices may encourage retail buyers and investors to return to the market, but jewellery demand recovery could remain gradual, especially if weaker monsoon conditions affect rural incomes.

Investment demand through bullion, Gold ETFs and digital gold is expected to remain resilient, while gold prices globally are likely to stay range-bound amid inflation concerns, crude oil prices and uncertainty over the US Federal Reserve's policy outlook.