What is gold recycling? Why Indians are selling less despite record-high prices

Sat Aug 08 2026

Indians are sitting on gold worth far more than it was a year ago, but they are selling less of it. Gold recycling, the sale of old gold for cash, fell to its lowest level in nearly three years in the June quarter, even as domestic prices were about 60% higher year-on-year.

The trend may seem counterintuitive.

Typically, a sharp rise in gold prices can encourage households to sell old jewellery and realise gains. However, in India, consumers appear increasingly reluctant to part with their gold outright. Instead, they are exchanging old jewellery for new pieces, borrowing against their holdings or simply waiting for prices to rise further.

According to the World Gold Council (WGC), India’s net gold recycling fell to 19 tonnes in the April-June quarter, down 38% from the previous quarter and 17% from a year earlier. It was the lowest level in 11 quarters.

The decline came despite domestic gold prices remaining around 60% higher than a year earlier.

What is gold recycling?

Gold recycling refers specifically to gold that existing owners sell for cash. In India, this can include old jewellery, coins and other gold articles sold to jewellers, refiners or other market participants.

The gold is then processed and re-enters the supply chain, either as bullion or new jewellery.

It is different from gold exchange. If a consumer gives an old necklace to a jeweller and uses its value to buy a new one, the transaction is treated as an exchange rather than recycled gold in WGC's supply calculations.

That distinction matters as exchange schemes become an increasingly important way for Indians to manage the cost of buying jewellery.

Why are Indians selling less gold?

The limited appetite to sell despite prices being around 60% higher year-on-year points to a positive outlook among gold holders, believes the WGC.

Consumers may simply prefer to hold on to an asset that has appreciated sharply rather than cash it out if they expect prices to rise further.

Gold also serves a broader financial purpose for Indian households. Instead of selling jewellery outright, owners can use it as collateral to raise money while retaining ownership.

Indians are borrowing against gold

Gold-backed lending has expanded rapidly, offering households another way to unlock the value of their holdings. Outstanding retail gold loans with banks stood at around Rs 5.1 lakh crore at the end of May 2026, up 105% from a year earlier, according to WGC data. Gold loans with NBFCs stood at around Rs 3.3 lakh crore, up 70%.

Collateralised borrowing against jewellery had gained traction as a way of monetising household gold, also noted the WGC in its report released late this July. Loan-to-value ratios were around 55% for banks and 60% for NBFCs as of March 2026, providing a buffer against a fall in gold prices. A sustained decline, however, could reduce that cushion and raise the risk of delinquencies.

High prices have also pushed consumers towards smaller jewellery purchases, while exchange offers allow them to use existing gold to reduce the cost of new pieces. Retailers reported a 10%-20% increase in exchange volumes, with exchanged gold accounting for as much as 70% of sales at some retailers, states the WGC.

Its survey of 1,963 consumers across 12 metro and Tier I cities found that buyers were increasingly opting for lighter-weight and lower-carat jewellery. Exchange offers, savings schemes and EMIs were also supporting purchases. The findings point to a broader shift towards value-conscious buying, with consumers comparing prices, discounts, exchange offers and payment options before purchasing.

Why has gold supply fallen?

India's gold supply fell to 120 tonnes in Q2, the lowest level in six years. Net bullion imports stood at 98 tonnes, down 22% year-on-year and 53% sequentially. Imports were relatively firm in April, supported by Akshaya Tritiya demand, but slowed in May and June after the higher import duty took effect.

As per the WGC, lower supply did not indicate a domestic shortage. Instead, softer demand reduced import requirements, while industry inventories and recycled gold helped meet demand. Recycling accounted for 16% of Q2 supply, imports 82% and domestic mine production 2%.

Import duties fuel unofficial gold flows

The decline in formal imports has also raised concerns over unofficial gold inflows. Unofficial gold inflows had increased after India raised the import tariff, it has been further learnt from the Council. Sachin Jain, CEO of the WGC's Indian operations, as cited by Reuters, stated that the combination of the 15% import duty and 3% GST had created a large gap between official and unofficial channels.

"The arbitrage is so huge," Jain said, adding that the difference was enough to encourage an entire industry around unofficial imports. According to government data cited by Reuters, enforcement agencies seized 160.91 kg of gold between May 13 and June 30, nearly twice the 86.16 kg seized between April 1 and May 12.

What does falling recycling tell us?

The decline suggests that high prices alone are not enough to make Indians liquidate their gold. Households are increasingly finding other ways to extract value from their holdings, borrowing against jewellery, exchanging old pieces for new ones or simply retaining gold as a long-term store of wealth.

The shift is also visible in overall demand. Indian gold demand fell 6% year-on-year to 131 tonnes in Q2, but spending rose 35% to a record Rs 1,979 billion, according to the WGC. For now, the trend suggests that Indians are increasingly choosing to hold on to their gold, exchange it or borrow against it rather than sell it outright for cash.

Source: https://www.moneycontrol.com