Indian Gold ETF Inflows Hit Seven-Month High as Seasonal Demand Builds

Indian gold ETF net inflows reached a seven-month high in September and remained positive through the middle of October, extending investor demand for bullion-backed exposure after a sharp pullback in prices, the World Gold Council said in its latest India market update. The result is a constructive signal for local investment demand, although it does not remove the pressure that lower gold prices exerted on the value of fund assets during September.1

The timing matters because the inflow recovery came as the gold market repriced abruptly. International gold ended September at US$4,176 an ounce, down 8.5% month on month, as higher US Treasury yields, a stronger dollar and reduced futures positioning outweighed support from global ETF buying. Indian domestic gold prices fell less sharply, declining 4.8% to INR147,613 per 10 grams, with a weaker rupee cushioning part of the international-price decline.1

ETF subscriptions therefore persisted through a period in which the mark-to-market value of underlying holdings was falling. That distinction is important for interpreting the Indian data: positive net flows show fresh allocations into gold funds, while assets under management can still fall when the bullion price declines. The World Gold Council said prices were broadly rangebound in October through mid-month, with domestic prices about 1% below their end-September level, partly reflecting rupee gains.1

The continued positive flow reading also coincides with a broader improvement in seasonal gold demand. India is entering its important festive and wedding buying period, and the recent fall in prices has provided support to jewellery purchases. Manufacturers have reported healthy order flows as retailers restock, while industry feedback points to improving store traffic, according to the World Gold Council’s India research head, Kavita Chacko.2

Market pricing suggests that this demand has begun to affect local conditions. Domestic gold discounts narrowed from an average US$66 an ounce in September to US$8 an ounce as of October 16. A smaller discount points to stronger domestic demand relative to the official local price, although the remaining discount to import parity indicates that supply is still adequate. Industry feedback cited old-gold supply and unofficial inflows as contributors to that availability.1

The investment picture is not uniformly stronger across every retail gold product. The World Gold Council said bar and coin demand moderated as price momentum cooled, reducing the pace of investment-related buying seen during the earlier rally. Gold ETFs, by contrast, recorded the September seven-month inflow high and continued to attract net money into October, suggesting that some investors have used a lower and more stable price range to maintain or add financial exposure to bullion.1

Listed jewellery retailers provide a separate indication of resilient demand. They reported year-on-year revenue growth of roughly 20% to 30% in the July-to-September quarter, supported by same-store sales and network expansion. Wedding purchases, preference for lighter-weight jewellery, promotions and e-commerce growth were among the factors cited. The performance was notable because festivals that aided the comparable period a year earlier shifted into the October-to-December quarter this year.2

The next test is whether the combination of stable October prices, the festive calendar and continuing ETF demand can be sustained. Lower prices have supported jewellery spending, but gold remains elevated in absolute terms and the World Gold Council cautioned that high price levels may continue to limit volume growth. For fund investors, the key distinction will remain between new subscriptions and the value of existing holdings: sustained inflows would demonstrate demand resilience, while asset values will still depend on bullion prices and the rupee.1