As the festive season approaches, the Indian gold market is showing promising signs of recovery, despite facing challenges from record-high prices and recent fluctuations in demand. According to the World Gold Council's latest update, domestic gold prices reached INR 75,549 per 10 grams, reflecting a slight discount to landed costs. This comes after a significant surge in prices earlier this year, driven by global factors including a weakening US dollar and ongoing geopolitical tensions. Although prices have slightly moderated in October, the market remains optimistic about a festive boost in demand, particularly from rural consumers.

The recent inauspicious period in the Hindu calendar, lasting from mid-September to early October, has kept many consumers from purchasing gold. However, with various festivals on the horizon, retailers are already seeing signs of increased buying activity, especially for wedding-related purchases. Retailers are implementing marketing strategies aimed at stimulating sales, as consumers begin to return to the market after a temporary lull. Anticipated improvements in rural incomes, bolstered by favorable monsoons and crop sowing, are expected to further support gold purchases in the coming weeks.

In addition to retail demand, investment in gold remains robust, particularly in bars and coins. The strong gold price momentum, combined with rising inflation concerns, has led many investors to seek the security of gold as a safe-haven asset. Online sales platforms are also contributing to this trend, making gold more accessible to a broader audience. The Indian gold ETF market is witnessing significant inflows, with net inflows of approximately INR 12 billion reported in September, reflecting a growing interest among retail investors following recent taxation changes.

On a macroeconomic level, the Reserve Bank of India (RBI) has been strategically increasing its gold reserves, with a notable addition of 54.7 tonnes in 2024, the highest acquisition in three years. This move aims to diversify the RBI's foreign exchange reserves and hedge against global uncertainties. With total gold holdings now at a record 858.3 tonnes, the RBI is positioning itself as one of the leading buyers of gold globally, which may further influence market dynamics.

Despite a drop in gold imports in September, which fell to approximately 55-57 tonnes compared to 136 tonnes in August, the overall import levels remain higher than average. The gold imports totalled around US$4.4 billion, significantly above the average of US$3.18 billion recorded from January to July. The moderation in imports is attributed to the normalizing of demand following a robust festival season earlier in the year. As the market braces for the festive season, expectations are high for a resurgence in gold purchases, underpinned by both cultural significance and investment appeal.