India’s largest jewelers are scaling back gold purchases ahead of the Diwali festival on November 8, opting to wait for lower prices as spot gold traded at $4,044.65 on Wednesday—down 3.26% over the past month. Together with China, India accounts for roughly half of global physical gold demand, making the seasonal slowdown a major drag on global market support.
Import Duty and Price Caution Restrain Physical Demand
Samit Guha, chief executive of refiner MMTC-PAMP India, stated that current buying is mostly driven by small and mid-sized jewelers. Larger retailers are deliberately running down existing inventory in anticipation of further price drops and plan to re-enter the market only after prices show sustained upward momentum.
Buyer hesitation has been exacerbated by India's 15% gold import duty, which was increased in May and has driven more trading into cash markets. Citi Research projects October-to-December gold imports to drop to approximately 106 tons—nearly half of traditional levels—citing tighter import regulations and weakened rural demand. In contrast, Chinese dip buyers have stepped in with record trade volumes as prices declined.
ETF Outflows and Federal Reserve Rate Expectations
Institutional support for gold is also wavering. Following a record quarter where gold exchange-traded funds (ETFs) absorbed $31 billion in net inflows according to the World Gold Council, investors recently withdrew nearly 17 tons across three trading days, according to Bloomberg data.
Saxo Bank strategist Ole Hansen identified key technical support at $3,970, noting that a break above $4,230 is required to prompt short covering. Meanwhile, European asset manager Amundi lowered its expectations, forecasting a recovery to $4,500 while removing its previous $5,000 year-end target. Analyst Benjamin Cowen highlighted macroeconomic pressures, suggesting a potential 2018-style Federal Reserve interest rate hike in December could delay gold's market bottom until January 2027, even as markets price in a 90% chance of a Fed rate hold on Wednesday.
Key Takeaways
- Spot Price Drop: Gold traded at $4,044.65, down 3.26% from a month ago.
- Plunging Imports: Citi Research forecasts India's Q4 gold imports at 106 tons, roughly half of normal seasonal volume.
- ETF Redemptions: ETF investors pulled 17 tons of gold in three days following a record $31 billion Q3 inflow.
- Key Levels: Saxo Bank marks support at $3,970 and resistance at $4,230 for short covering.
Why It Matters
The reluctance of major Indian jewelers deprives the gold market of its strongest seasonal demand driver during the peak fourth-quarter festival period. Compounded by heavy institutional ETF outflows and tight central bank monetary policy, spot gold faces diminished physical and financial backing. Without a swift return of Asian physical buyers, gold prices remain vulnerable to retesting sub-$4,000 support levels into early 2027.
