Gold prices swing: 6 things buyers and investors should know this festive season

If you have tried buying jewellery or looking at gold investments lately, you have probably felt like you are on a roller coaster.

Gold prices hit fresh highs in August before cooling off in September, keeping both shoppers and investors on their toes.

Gold remains expensive and price swings continue as India’s peak festive and wedding season is almost here.

The World Gold Council’s (WGC) latest report titled 'India Gold Market Update, Cautious Festive Optimism', offers some insight into what is happening beneath the headline gold price.

1. Gold prices surged in August, but have pulled back in September

The WGC attributed the rally to strong investment flows and a softer US dollar.

The momentum, however, did not carry into September. As of September 11, international gold prices had fallen 3.9%, while domestic prices were down 4.6%. The move came amid changing expectations around US Federal Reserve policy and softer global gold ETF flows.

For someone planning a jewellery purchase, the September correction may look encouraging after August’s sharp rise. But a short-term fall does not necessarily mean gold has become “cheap”.

2. Gold ETFs are still seeing demand, but new investors are slowing down

ETF holdings increased by 1.6 tonnes during the month, taking cumulative holdings to 121.3 tonnes. Assets under management rose to ₹1.91 lakh crore.

There was, however, a notable change in the number of new investors coming in. Around 4,000 new folios were added in August, taking the total to 1.254 crore. From January to July, the average monthly increase had been around 3.3 lakh folios.

The WGC said the moderation in inflows likely reflects periodic profit-taking and softer price momentum. Limits on large direct subscriptions may also have played a role.

The takeaway for investors is less about whether ETF demand is “good” or “bad” and more about how investor behaviour is changing after the sharp run-up in prices. Existing investors are still putting money into the asset class, but enthusiasm among new investors appears to have cooled.

3. Digital gold continues to gain traction

Digital gold buying remained fairly steady between June and August, averaging around ₹2,500 crore a month.

In volume terms, purchases averaged 1.6 tonnes a month during this period. August purchases were 110% higher than a year earlier, according to the WGC.

The appeal is fairly straightforward: digital gold allows people to buy small amounts and accumulate them over time without dealing with physical storage. The WGC also sees evidence that some consumers are moving from physical gold towards digital forms.

For savers, however, the convenience of buying gold digitally shouldn't be confused with the product being identical to a gold ETF or physical gold. The structure, costs, regulation and risks can differ across products.

4. Jewellery buyers are cautious, but weddings are keeping demand alive

High prices have clearly made jewellery buyers more cautious. Industry feedback cited by the WGC suggests that consumers have moved into a “wait-and-watch mode”, particularly for discretionary purchases. Retailers, too, are being careful about building inventory and are replenishing stocks according to actual demand. Some manufacturers have reported delays in retailers taking up orders.

Wedding demand, on the other hand, has remained relatively resilient.

There are also signs of a shift towards lighter-weight jewellery, which can help buyers manage the impact of high gold prices without giving up on wedding or festive purchases altogether.

For households, this is perhaps the most immediate impact of the current gold-price environment. A family buying jewellery this season may end up buying less gold, choosing lighter designs or postponing a non-essential purchase in the hope of getting a better price.

It is also worth looking beyond the headline gold rate when comparing jewellery prices. Making charges, wastage and taxes can significantly affect the final bill.

5. Gold futures trading hits a five-month high

There has also been a pickup in activity in India’s gold futures market.

On the Multi-Commodity Exchange (MCX), average daily turnover rose 38% month-on-month in August to ₹29,500 crore, the highest level in five months. Average daily volumes increased 27% to 19 tonnes.

The WGC said the increase coincided with the sharp rally in gold prices and likely reflected greater hedging as well as tactical trading.

Even so, turnover and volumes remained 48% below their January peak.

For most individual investors, futures activity is more of a market signal than an investment opportunity.

6. Gold imports fall as domestic supply remains sufficient

India’s gold imports fell sharply in August to US$2.3 billion, down 45% from July and 58% from a year earlier.

Gross import volumes were estimated at 15-20 tonnes, while gold’s share of total merchandise imports fell to 3%, from 9% a year earlier.

The WGC said the fall in imports suggests existing domestic supplies were sufficient to meet expected demand.

One reason is the continued exchange of old gold for new jewellery. This has increased local supply and helped keep domestic gold prices below the landed cost of imported gold. The WGC also cited unofficial supply as another contributing factor.

For consumers, the key point is that India’s gold price is influenced by more than international prices. Domestic supply, recycling and local demand conditions can also affect the price at which gold trades in the country.

The WGC expects demand to improve as the festive and wedding season progresses, supported by steady investment demand and resilient wedding-related buying. However, elevated prices and volatility could continue to weigh on discretionary jewellery purchases.

Gold rates today

Gold prices on Friday rose by ₹1,309 to ₹1,54,290 per 10 grams in futures trade as speculators created fresh positions on firm spot demand.

On the Multi Commodity Exchange, the yellow metal contract for October delivery traded higher by ₹1,309, or 0.86 per cent, at ₹1,54,290 per 10 grams in a business turnover of 2,156 lots.

Disclaimer: This article is written purely for informational purposes and should not be considered investment advice from Upstox. Securities mentioned are illustrative and not recommendations. Investors should do their own research or consult a registered financial advisor before making investment decisions.