Gold imports plunge in India, but gold ETFs surge: What the demand shift means for investors

India’s gold imports have weakened sharply in recent months, pointing to softer physical demand. However, rising investment through gold exchange-traded funds (ETFs) suggests that Indian investors have not necessarily lost interest in the precious metal.

According to ICICI Bank Global Markets, India’s gold imports fell to $2.3 billion in August 2026 from $4.2 billion in July, highlighting the cooling of physical gold demand. At the same time, domestic gold ETF inflows increased to ₹2,600 crore in August, indicating continued interest in gold as an investment asset.

This divergence is important because gold demand in India comes through different channels. Jewellery purchases and physical gold account for a significant part of consumption, while ETFs offer investors exposure to gold prices without the need to buy or store physical metal.

Physical demand under pressure

ICICI Bank said domestic gold prices have fallen about 8% over the past month, providing some relief to consumers. However, prices remain elevated and continue to weigh on discretionary jewellery purchases. Wedding-related demand has remained relatively resilient, while festive-season demand has been more cautious, with some consumers delaying purchases following sharp price movements.

The decline in imports also needs to be viewed against the broader price environment. Higher gold prices can discourage consumers from making jewellery purchases, even when they remain positive about gold as an asset class.

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ETF demand paints a different picture

Investment demand, meanwhile, has remained comparatively supportive. Indian gold ETF inflows rose to ₹2,600 crore in August, according to data cited by ICICI Bank from the Association of Mutual Funds in India (AMFI).

The global picture is also supportive. ICICI Bank said gold ETFs recorded $17.8 billion of inflows in August, taking third-quarter 2026 gold ETF demand to 144.7 tonnes. Strong ETF demand, alongside continued central-bank purchases, has helped provide a floor to gold prices despite pressure from higher US yields and a stronger dollar.

Kotak Institutional Equities has offered another possible explanation for the decline in official imports. It said lower imports could reflect weaker household purchases after the May 13 import-duty increase, a temporary pause as buyers await possible changes in duties, or a shift towards unofficial channels.

That means falling import numbers alone may not provide a complete picture of household gold demand.

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What it means for investors

The contrasting trends suggest that physical and investment demand are behaving differently. Jewellery buyers remain sensitive to elevated prices, while investors continue to use gold ETFs to gain exposure to the asset.

ICICI Bank expects domestic gold prices to remain in the ₹1.40 lakh–₹1.60 lakh per 10 grams range through the remainder of 2026, with festive and wedding demand potentially providing some support.

For the Indian gold market, therefore, the key question is not simply whether demand is falling, but where that demand is moving—from physical purchases towards financial gold, or potentially outside official import channels.

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