A steep correction in gold prices has significantly altered buying patterns in India, with demand falling by more than 70 per cent and households increasingly opting to sell old jewellery instead of making fresh purchases.

The shift comes after gold prices retreated sharply from record highs earlier this year, prompting concerns among consumers and investors that prices could fall further in the months ahead.

Demand Drops As Prices Retreat

Gold prices have fallen substantially from their peak levels, reducing consumer interest in new purchases despite lower rates.

MCX gold was trading at around Rs 1,42,546 per 10 grams on Wednesday, more than Rs 50,000 below its all-time intraday high of Rs 1,92,991 recorded earlier this year.

Internationally, spot gold fell 0.6 per cent to $3,981.69 an ounce after touching a seven-month low in the previous session.

According to Surendra Mehta, Secretary of the India Bullion and Jewellers Association (IBJA), domestic gold demand has declined by more than 70 per cent.

Speaking to Moneycontrol, Mehta attributed the slowdown partly to the government’s decision in May to increase customs duty on gold from 6 per cent to 15 per cent.

He also said demand remained subdued following Prime Minister Narendra Modi’s appeal to citizens to defer gold purchases for a year.

Households Increasingly Selling Old Jewellery

Rather than taking advantage of lower prices to buy more gold, many households have chosen to monetise existing holdings.

According to the report, sales of old gold jewellery during the April-June quarter are estimated to have reached nearly 50 tonnes.

This represents an increase of more than 50 per cent compared with the same period last year.

Mehta said consumers and investors have been selling gold in the open market amid expectations that prices may continue to decline.

The trend has also provided a boost to India’s gold recycling industry, with more idle jewellery being converted into cash.

Global Factors Continue To Pressure Gold

Gold has come under sustained pressure in international markets as investors reassess expectations for US monetary policy.

Analysts say expectations that the US Federal Reserve could maintain higher interest rates for longer have reduced the appeal of gold, which does not generate regular income.

Higher interest rates have also strengthened the US dollar, making bullion less attractive to global investors.

Spot gold is now on course for its fourth consecutive monthly decline, while the current quarter is shaping up to be the metal’s steepest quarterly fall since 2013.

Analysts Cite Inflation And Interest Rates

Dr Renisha Chainani, Head of Research at Augmont, said gold prices have declined for four straight weeks and are now nearly 30 per cent below their January 2026 peak of $5,597 an ounce.

According to her, a combination of elevated inflation, a stronger dollar and a hawkish US Federal Reserve has weighed heavily on bullion prices.

She noted that while the recent conflict involving the United States and Iran briefly increased demand for safe-haven assets, rising crude oil prices shifted market attention back to inflation concerns and the possibility of further interest-rate increases.

As a result, gold was unable to sustain any meaningful recovery.

Market Watches Key Economic Data

Analysts say upcoming US economic indicators will play a crucial role in determining gold’s next move.

Dr Chainani said investors should closely monitor non-farm payroll data and manufacturing indicators, which could influence expectations regarding future Federal Reserve decisions.

According to her, weaker economic data or softer inflation readings could help gold recover towards the $4,100-$4,150 range.

However, stronger-than-expected employment figures could push prices back towards the key $4,000 support level.

Augmont’s latest bullion report said gold has already fallen below the important $4,000 threshold and is currently trading near $3,960 an ounce.

The firm said a break below current support levels could result in prices declining towards $3,600 an ounce, equivalent to roughly Rs 1.30 lakh per 10 grams in the domestic market.

At the same time, analysts noted that gold is now in oversold territory, raising the possibility of a short-term rebound towards $4,100-$4,165 an ounce, or approximately Rs 1.45 lakh to Rs 1.47 lakh per 10 grams.

Experts Recommend Gradual Accumulation

Despite the sharp correction from record highs, market experts caution against making large lump-sum investments solely because prices have fallen.

They say the near-term outlook for gold will continue to depend on interest-rate expectations, movements in the US dollar and geopolitical developments.

Rather than attempting to predict the exact bottom of the market, analysts suggest investors consider a gradual accumulation strategy if they wish to increase exposure to gold.

With uncertainty surrounding global monetary policy and economic growth, gold remains vulnerable to further volatility even after its significant decline from peak levels.

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