Last spring, Prime Minister Narendra Modi urged Indians to put off buying gold for a year.
They apparently didn’t heed the advice.
The Titan Company reported a 63 percent profit increase in the second quarter and a notable increase in foot traffic. And according to the Financial Times, “jewelry accounts for the vast majority of the chain’s earnings.”
Modi wants Indians to forgo gold to control the country’s trade deficit, which is putting pressure on the rupee.
Gold and silver make up around 11 percent of India’s total imports.
Meanwhile, oil accounts for around 22 percent of the nation's imports. The sudden spike in oil prices due to the U.S.-Iran war hit India particularly hard. The country imports nearly 85 percent of its fuel, and about 50 percent of its crude imports flow through the Strait of Hormuz.
With both gold and oil prices spiking, India’s import bill has exploded. The country’s merchandise trade deficit topped $330 billion in the financial year ending March 2026. That was up from over $280 billion a year ago, a 17.9 percent increase.
The trade situation has put significant downward pressure on the rupee.
To try to stem the flow of gold into the country, the government hiked customs duties from 6 to 15 percent in May, along with Modi’s plea to stop buying gold.
Titan managing director Ajoy Chawla called the impact of those measures “not long-lasting.”
“Their love for the product and gold is there; that is not disappearing. They are looking at it as a store of asset value. Even for a person who is not necessarily planning to sell their jewelry ever, they look at it as a portfolio.”
The data bears Chawla out.
After two straight weak months, gold imports doubled in July, rising from 20 tonnes in June to an estimated 40-45 tonnes, signaling stronger demand.
The World Gold Council (WGC) reported improving Indian jewelry demand in July.
“Industry feedback suggests that deferred purchases returned to the market, resulting in higher footfall and a recovery in demand beyond essential wedding-related purchases. Manufacturers have reportedly begun receiving higher order flows, and inventory replenishment by jewelers has picked up ahead of the festive season, suggesting growing confidence in seasonal demand.”
Indian jewelry sales jumped by about one-third year-on-year to $21 billion in Q2, according to WGC data. Indian jewelry merchants reported strong quarterly earnings, with revenue growth from 30 to 60 percent year-on-year. Religious festivals and the summer wedding season supported gold jewelry sales in the second quarter.
Meanwhile, Modi reiterated his appeal last week, asking Indians to avoid buying gold “if not necessary.”
Apparently, a lot of Indians find it necessary.
In fact, Indians love gold for both cultural and economic reasons.
The yellow metal is deeply interwoven into India’s marriage ceremonies, along with its religious and cultural rituals. Festival seasons typically boost gold demand.
Indians also value the yellow metal as a store of wealth, especially in poorer rural regions. Around two-thirds of India’s gold demand originates outside urban centers, where many people operate outside the tax system. A lot of Indians use gold jewelry not only as an adornment but as a way to preserve wealth.
In the West, gold is generally viewed as a luxury item.
Not in India. Even poor Indians buy gold.
According to a 2018 ICE360 survey, one in every two households in India had purchased gold within the last five years. Overall, 87 percent of Indian households own some gold. Even households at the lowest income levels in India hold some of the yellow metal. According to the survey, more than 75 percent of families in the bottom 10 percent of income managed to buy some gold.
Given the Indian love affair with gold, it’s not surprising that Modi’s pleas fell on deaf ears.
Last May, Metals Focus predicted the higher tax, and government begging would only have a limited impact on the Indian gold market.
That’s because Indian gold and silver demand historically remained resilient, even in a higher-tax environment.
According to Metals Focus analysts, “Consumers often delay purchases initially following sharp price increases but typically adjust to higher price levels over time. In addition, elevated duties could encourage a recovery in unofficial flows, which had collapsed following the 2024 duty reduction.”
In fact, as the rupee depreciates, gold will likely become increasingly attractive.
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