India’s gold market strengthened in July as ETF holdings and imports surged – WGC’s Chacko

Thu Aug 21 2025

Indian gold prices rose last month and into August, with discounts narrowing as retailers ramped up inventories for the festival season, all while ETF flows and holdings rose, according to Kavita Chacko, Research Head for India at the World Gold Council (WGC).

Chacko wrote in the latest WGC update that gold prices have seen renewed strength in August after July’s modest 0.3% gain. 

“A combination of factors, including a weaker US dollar, expectations of a Fed rate cut, rising inflation expectations, and ongoing tariff developments, has driven the recent price movement,” she said. “Similarly, gold price movement in July was supported by tariff tensions, geopolitical risks, and inflation concerns, with market momentum also contributing.”

And despite bullion prices remaining range-bound, “gold continues to outperform in 2025, delivering a 28% return in US dollar terms year-to-date.”

Chacko noted that domestic gold has closely tracked international prices, with the weakening rupee amplifying the gains. “As of mid-August, prices had risen 1.6% month-to-date4 to INR 99,665/10g, taking the year-to-date increase to 31%,” she wrote. “Importantly, signs of improving demand have led to a narrowing of domestic market discounts – from an average of US$27/oz in June to US$3.7/oz as of mid-August.”

The gold jewellery market is also showing signs of renewed demand as retailers gear up for the festive and wedding season, which runs from early August through year-end. 

“Anecdotal reports from industry stakeholders suggest a positive outlook,” Chacko said. “[M]any manufacturers reported stronger-than-expected buying interest and a noticeable pickup in orders from both large chain stores and independent retailers. Retailers who had been cautious about their inventories in recent months due to lacklustre demand reported active restocking in anticipation of improved festive sales.”

She added that stable gold prices are also supporting positive sentiment. 

“Furthermore, to appeal to price-sensitive customers and to drive volumes, manufacturers are focusing on lighter-weight jewellery,” Chacko wrote. “Meanwhile, market reports suggest that investment demand for physical gold, i.e. bars and coins, remains healthy.”

Flows into Indian gold ETFs also remained positive in July, marking the third consecutive month of net inflows. 

“Global policy-related uncertainties and geopolitical tensions have been major drivers of this trend,” she said. “But, the pace of net inflows slowed, declining to INR12.6bn (US$146mn) in July, down 41% from the previous month. This was broadly in line with our initial estimate and nearly 34% higher than the 2024 monthly average of INR 9.4bn.”

Chacko said this positive momentum has carried over into August, with initial data for the first two weeks showing higher inflows.

ETF holdings also continued their string of strong recent performances last month.

“At the end of July, Indian gold ETFs’ cumulative assets under management (AUM) stood at INR676bn (US$7.85bn), a 96% y/y increase,” she wrote. “Total gold holdings rose to 68t, with 1.2t added during the month.”

“Investor interest in gold ETFs continues to strengthen as indicated by the steady growth in new accounts (folios); 215k new folios were added in July, bringing the total to 7.86mn, a 42% y/y increase,” she added. “One new gold ETF was also launched in July, bringing the total number of gold ETFs listed in India to 21.”

The Reserve Bank of India (RBI) held off on gold purchases in July after a relatively small addition of 0.4 tonnes in June. 

“Over the first seven months this year, it increased its gold reserves by 4t, a sharp contrast to the 40t bought during the same period in 2024,” Chacko said. “We believe that this suggests a measured approach in the RBI’s gold reserve management amid significant gains in the gold prices.”

Even with the slowdown, RBI’s gold holdings remained at a record high of 880 tonnes through July, and now account for 12% of total foreign exchange reserves for a year-over-year gain of 4%.

Meanwhile, bullion imports rebounded in July following three straight months of declines. 

“At US$4bn, imports in July notably surpassed the monthly average imports for the first six months of 2025 (US$3bn); up 14% y/y and more than double the value of those during June,” she noted. “Our estimates indicate that the volume of gold imported in July ranged from 42t to 48t. The higher import levels suggest that manufacturers are likely preparing for festive season demand, beginning in August.”

Looking ahead, Chacko said the World Gold Council expects strong seasonal demand in the gold market through the end of the year.

“As the festive and wedding season approaches there are signs that gold jewellery demand is gaining momentum, and with investment interest holding firm, overall gold demand could receive a boost,” she said.

Sour ce: https://www.kitco.com/