Physical demand for gold has plummeted in major global markets as prices continue to soar, with many retail consumers opting to sell their holdings and cash in on profits, according to industry insiders and analysts. Spot gold hit a record $2,685.42 per ounce on September 26, marking a nearly 29% increase for the year—the biggest annual gain in 14 years. This rally has been driven by U.S. Federal Reserve interest rate cuts and rising geopolitical tensions.

“Physical demand in general is super low everywhere now,” said Robin Kolvenbach, head of Swiss refinery Argor-Heraeus SA. “There was a spike in demand in August when India cut its import duty, but since then it has gone completely dead again.”

India, the world’s second-largest gold consumer after China, saw a temporary boost in demand when it slashed import duties in July to curb smuggling. However, local gold prices soon skyrocketed to record highs, causing a sharp decline in demand.

“Consumers are finding it difficult to cope with the price increase. We are suddenly witnessing a significant slowdown in demand,” said Prithviraj Kothari, president of the India Bullion and Jewellers Association (IBJA).

In Europe, Germany remains the largest market for physical gold investments, but demand in both Germany and Austria has been hit hard since 2020, as high interest rates have encouraged investors to move toward yield-bearing assets. 

As gold prices remain elevated, the market continues to struggle with waning consumer interest, particularly in regions traditionally known for robust physical demand.

Source: Reuters.com