Gold demand in India softens as prices rise

The shift is visible in the trading numbers. Dealers quoted discounts of as much as $6 an ounce over official domestic prices this week, narrower than last week’s $14 discount, a sign that imports have eased and buyers are not rushing in even after prices briefly improved. In other words, the market has not yet earned the premium that usually arrives when festival demand strengthens.

That is the key investment implication: gold is not just reacting to macro fear and US rates anymore, it is also bumping into real-world affordability ceilings in Asia. India’s Dussehra and Diwali season, which usually supports jewelry and investment buying, starts in October and early November. If demand does not improve, the physical floor under bullion could remain thinner than bulls expect.

China is not providing much help either. Trading in the top consumer was subdued after the Golden Week holiday, though bullion still held a $10-an-ounce premium to the global benchmark, showing underlying buying interest as markets reopened. That is constructive, but not enough to offset India’s hesitation on its own.

International spot gold rose more than 1% after touching a two-month low earlier in the week, but the bounce is exposing a split market: paper prices are recovering while physical demand in key Asian hubs remains cautious. For investors, that means the near-term trade is less about chasing momentum and more about positioning for the next demand inflection.

The opportunity remains in the ecosystem around gold, not just the metal itself. Physical dealers, refiners and exchange-traded products such as GLD can benefit if the festival season revives buying, while miners like Newmont stand to gain if renewed retail demand supports prices. But if Indian consumers keep waiting for lower levels, jewelers and bullion distributors may be forced to absorb thinner volumes and narrower margins.

The market is underestimating how quickly India can swing from bargain-hunting to outright withdrawal when prices rise. That makes the next few weeks critical. If festive buying fails to show up, the message to gold investors will be clear: this rally still needs physical demand to prove itself.