India’s premium for physical gold delivery has risen to $7 per ounce, reversing from previous discounts, as jewellery manufacturers and bullion traders accelerate purchases in anticipation of further price increases. This shift in sentiment comes as the industry prepares for the busy festival season, which includes Dussehra and Dhanteras. While the elevated prices have dampened retail jewellery demand, gold has recovered from a discount of $6 per ounce in recent days, according to a prominent jewellery manufacturer.
Despite the ongoing rise in gold prices discouraging some jewellery buyers, the market expects demand to rebound soon as consumers adjust to the current price levels.
Strong Import Levels
On the supply front, gold imports have remained robust, totaling 102 tonnes in the June quarter, whereas jewellery demand has reached only 89 tonnes. Gold prices surged by 7 percent in the first half of September, now standing at ₹1,06,863 per 10 grams, resulting in a year-to-date increase of 44 percent. Kavita Chacko, Research Head at the India Gold Council (WGC), noted that signs of renewed demand have contributed to narrowing domestic price discounts, which transitioned to a slight premium in late August and again in mid-September. This marks a significant change; domestic gold prices have mostly traded at a persistent discount since December.
Impact of GST Reduction
As gold is dollar-denominated, a weak rupee—down 3 percent year-to-date against the dollar—has further inflated domestic gold prices. Since early September, bullion dealers have increased purchases in anticipation of stronger seasonal demand and potential boosts from increased consumer spending resulting from an upcoming Goods and Services Tax (GST) reduction. This tax relief applies to various items, including consumer goods, durables, and automobiles, and takes effect just as the festive season approaches its peak following a 16-day inauspicious period.
New Price Peaks
On Monday, domestic gold prices increased by ₹2,400 per 10 grams, reaching a new high of ₹112,155 per 10 grams compared to ₹109,775 from Friday, as reported by the Indian Bullion and Jewellers Association. Concurrently, spot gold rose by one percent to $3,724 per ounce, having previously hit a record high of $3,726 earlier that day. U.S. gold futures for December delivery climbed 1.4 percent to $3,758 an ounce.
Manav Modi, Analyst—Precious Metal Research at Motilal Oswal Financial Services, stated that gold remains close to record highs due to escalating geopolitical tensions and investor anticipation regarding upcoming speeches from Federal Reserve officials and inflation data, following the Fed’s cut in interest rates last week.
Global Influences
Colin Shah, Managing Director of Kama Jewelry, highlighted that recent increases in gold prices above ₹1.10 lakh per 10 grams domestically are primarily driven by international factors such as geopolitical tensions, trade disruptions, American tariffs, and poor U.S. labor market indicators that resulted in the Fed rate cuts. While such substantial hikes have temporarily weakened conventional retail consumption, Shah remains optimistic that festival and wedding seasons will rejuvenate demand, given the cultural significance of gold purchases during auspicious occasions.
Consumers are increasingly gravitating towards lightweight jewellery—14K to 18K—due to affordability, while a shift in perspective among younger buyers sees gold regarded more as a prestige item than merely an investment. At the same time, heavier traditional jewellery is expected to experience seasonal demand fluctuations during the festive and wedding periods.
Shah also noted that gold coins and bars continue to attract investors. He emphasized that despite high prices, the sentimental value of gold and robust consumer appetite, coupled with innovative designs from jewellers, will ensure sustained sales for the industry. Renisha Chainani, Head of Research at Augmont, indicated that if gold futures break over $3,730 (₹1,10,500), the next target could be $3,800 (₹1,13,500), but any fall below $3,660 (₹1,08,700) might trigger profit-taking.
Published on September 22, 2025
