Gold Outlook: Gold remains a preferred investment and festive purchase for Indian households, with demand typically picking up during Dussehra, Diwali and the wedding season. However, elevated prices are changing buying patterns, prompting some families to opt for lighter jewellery while others are turning to coins, bars and gold exchange-traded funds (ETFs).
With the yellow metal having corrected from its record highs, buyers are assessing whether the dip offers an opportunity to purchase gold or whether prices could face further pressure.
Gold prices edged higher on Tuesday, supported by a softer US dollar, as investors looked ahead to the US Federal Reserve’s October 27–28 policy meeting for clues on the future path of interest rates. Spot gold rose 0.1% to $4,145.22 per ounce by 0347 GMT, while US gold futures for December delivery gained 0.1% to $4,164.70.
The recovery followed a correction of more than 26% from record highs in January. According to CME’s FedWatch Tool, traders were pricing in an 82% probability that the Federal Reserve would leave interest rates unchanged at its October meeting, although expectations of a rate hike in December remained elevated at 89%. Higher interest rates typically weigh on gold because bullion does not pay interest, increasing the opportunity cost of holding it. A weaker dollar, meanwhile, makes greenback-priced gold more affordable for overseas buyers.
Ashish Rajodiya, Head of Commodities at PL Capital, said softer crude prices and lower Treasury yields had supported bullion after recent volatility. He added that the Fed’s policy statement and upcoming inflation data would be key triggers, while a renewed oil-price spike or hawkish signals could put pressure on gold and silver.
Gold ETFs and digital gold gain as physical demand cools
Gold ETFs attracted net inflows of ₹2,596.70 crore in August, up from ₹1,559 crore in July, marking the third consecutive month of positive flows. Assets under management rose to around ₹1.91 lakh crore, backed by 121.3 tonnes of gold, while year-to-date inflows reached $4.22 billion.
Digital gold purchases averaged around ₹2,500 crore a month from June to August, with August buying up 110% year-on-year. Gold futures trading also picked up, as average daily turnover on MCX rose 38% month-on-month to about ₹29,500 crore, the highest in five months.
Physical demand, however, weakened. India’s gold imports fell to $2.3 billion in August, down 45% from July and 58% year-on-year. Domestic prices traded below import parity, with the discount widening to $78 an ounce by September 11, partly as consumers exchanged old jewellery for new pieces.
Gold buying trends: What Indians are doing this Dussehra, Diwali
Despite the correction, gold remains an important festive purchase in India. However, higher prices are influencing how households spend their budgets, with some buying lighter jewellery and others shifting towards coins, bars and ETFs.
Rajeev Sharan, Head of Research at Brickwork Ratings, said 24-karat gold was trading near ₹1.48 lakh per 10 grams as India entered the festive season. He noted that households were keeping their rupee budgets steady but purchasing less jewellery by weight, while investment-oriented gold buying was gaining traction.
“What has changed this festive season is not the Indian household’s love for gold, but how people are buying it,” he said
Sharan said the shift reflected a growing focus on wealth protection alongside traditional jewellery purchases. He expects high US interest rates to limit a sharp near-term rally, keeping gold within a range of around 5% on either side. He added that some buyers were treating recent price dips as potential entry points.
Gold price outlook: Will gold prices rise again by Diwali?
The outlook for gold will depend on the balance between festive and wedding demand in India and global factors, including US monetary policy, inflation expectations, Treasury yields and geopolitical developments.
Vikas Gupta, smallcase manager and CEO of Omniscience Capital, said the longer-term outlook for gold remained positive in market consensus, although expectations of rising inflation and interest rates could complicate the outlook. He expects central-bank purchases to support demand, while selling by other investors could limit price gains.
“The consensus on gold for the next 2-3 years seems to be upward. The consensus on inflation and interest over the same period also seems to be upward. However, both cannot happen simultaneously,” said Gupta
Gupta expects India’s festive and wedding seasons to provide some support to domestic gold prices, although the possibility of US Federal Reserve rate hikes could keep international prices under pressure. In his assessment, Indian gold prices could see a modest festive-season rise before stabilising.
Rajodiya of PL Capital also highlighted crude oil prices and Treasury yields as important factors. Softer crude could ease inflation concerns, while lower yields would support non-interest-bearing assets such as gold. Conversely, an oil-price spike or a more hawkish Fed stance could reverse the recovery.
For Indian buyers, the recent correction offers some relief after gold’s record-setting rally, but it does not guarantee another sustained surge. Festive demand could support domestic prices in the near term, while interest-rate expectations, currency movements and global developments remain key factors to watch.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
