Gold Demand in India Turns Up Again Ahead of the Festive Season

A three-way signal from the World Gold Council

On 19 August 2026, the World Gold Council published its latest India Gold Market Update, authored by its India research head Kavita Chacko, and the picture it paints is unusual: jewellery demand, gold ETF investment, and gold futures trading are all recovering at the same time. That kind of simultaneous pickup across physical, financial and derivative gold markets does not happen often, and it gives a fuller view of how Indian households and investors are actually behaving toward gold right now, rather than relying on any single data point.

The immediate trigger is price. Gold had corrected sharply in June and then stabilised through July. In the first two weeks of August, international gold prices rose 9 per cent to touch US$4,391 an ounce, while domestic prices gained close to 7 per cent to reach Rs. 1,51,744 per 10 grams as of 14 August. The Council attributes this rebound to shifting expectations around monetary policy, a weaker US dollar, and renewed inflows into gold exchange-traded funds — with the rupee's appreciation against the dollar partly cushioning the domestic price move.

What actually recovered, and by how much

On the jewellery side, the Council's India research head noted that deferred purchases returned to the market, and that manufacturers reported higher order flows even as jewellers increased inventory ahead of the festive season. This matters because Indian jewellery demand is highly price-sensitive in the short run — when prices fall or stabilise, buyers who had postponed purchases tend to come back, and that is what the update describes happening through July and into August.

On the investment side, the numbers are more precise because they come from AMFI's monthly mutual fund data. Indian gold ETFs recorded net inflows of Rs. 1,560 crore in July 2026, which was actually 55 per cent lower month-on-month than June's Rs. 3,443 crore. Despite that moderation, ETF gold holdings still rose by 1 tonne to 120 tonnes, and assets under management increased 2 per cent to Rs. 1,73,300 crore. Crucially, the recovery did not stop there — in just the first two weeks of August, gold ETFs are estimated to have pulled in a further Rs. 1,179 crore of net inflows, suggesting the softer July number was a pause rather than a reversal.

Retail participation also kept widening. According to the Council's update, a further 57,000 new gold ETF folios (individual investor accounts) were added in July alone, taking the cumulative tally to 12.53 million accounts. Folio growth of this kind indicates that new investors are still entering the category even as existing investors' monthly contributions ebb and flow with sentiment.

The futures market told a similar story. Average daily trading volumes on the Multi Commodity Exchange of India rose to 14.9 tonnes in July, up from 13.5 tonnes over the preceding three months, while average daily turnover increased 9 per cent month-on-month to Rs. 21,400 crore — evidence of renewed trader and hedger participation as prices stabilised and then began climbing again. Gold imports, meanwhile, more than doubled in value in July, though the Council pointed out that gold's share of total merchandise imports remained a modest 5 per cent, well below the 11 per cent average seen in the January-March quarter, meaning the rebound is real but still well short of the intensity seen earlier in the year.

Why this is more than a monthly data point

To understand why a single monthly update matters, it helps to place it against the backdrop of what has happened to gold as an investment category in India over the past eighteen months. Gold ETF assets under management surged from roughly Rs. 59,000 crore in March 2025 to over Rs. 1.71 lakh crore by March 2026 — a 191 per cent jump in a single financial year, according to a Zerodha Fund House study based on AMFI data. In that same FY26, gold and silver ETFs combined actually pulled in more money than equity ETFs for the first time ever, with commodity ETFs attracting Rs. 99,280 crore against Rs. 77,780 crore for equity ETFs. January 2026 alone saw gold ETF inflows of over Rs. 24,000 crore.

That boom moved fast enough that, by mid-June 2026, at least six large fund houses had imposed subscription restrictions on their gold ETF and gold fund-of-fund schemes — an unprecedented step that reflected difficulty in sourcing enough physical gold to back new units at the pace money was arriving. Seen against that backdrop, July's 55 per cent drop in monthly ETF inflows looks less like investors losing faith in gold and more like a natural cooling after an extraordinary run, especially with some fund houses still managing subscription flow. The fact that folios kept growing and that early August inflows bounced back supports that reading, though it remains a judgement call rather than a settled fact — commentators could reasonably differ on whether the softer July number was primarily about fund house caps, profit booking after the rally, or a genuine dip in appetite.

Gold and SIPs, side by side, not instead of each other

What makes this update relevant to the broader question of what Indian retail investors are choosing is that it did not happen in isolation from equity behaviour. In the very same month, July 2026, AMFI reported that SIP contributions into mutual funds touched Rs. 31,961 crore, a four-month high, with small-cap and mid-cap equity categories continuing to draw the bulk of fresh money even as large-cap funds saw net outflows. Read together, the two data sets suggest that Indian households are not simply rotating money out of gold and into equities, or vice versa, as prices move. Instead, both channels — disciplined monthly SIP investing in equity funds and lump-sum-plus-SIP investing in gold ETFs — have been running in parallel, each attracting new participants even as monthly amounts fluctuate with sentiment and prices.

What this means in practice

For someone already holding gold ETFs, sovereign gold bonds, physical jewellery, or gold mutual funds, this update is a reminder that gold's role in a portfolio has shifted meaningfully in India over the past two years — from being almost entirely a cultural and jewellery-driven asset to being one where financial products now carry over a lakh and a half crore rupees of retail money, with monthly flow and folio data published just like for equity funds. That transparency itself is new territory for gold in India.

For anyone tracking allocation across asset classes, the practical takeaway is that gold's behaviour is no longer just a function of Akshaya Tritiya or wedding-season buying; it now also responds to global monetary policy expectations, dollar movements, and the same kind of monthly flow data that mutual fund investors are used to seeing for equities. Whether the current recovery in jewellery, ETF and futures demand strengthens into the festive season, as the World Gold Council's update anticipates, or moderates again, is not something any single report can settle — the Council itself frames this as an expectation for improving demand conditions rather than a certainty, and forecasters differ on how far the current price rally can extend from here.