Bengaluru: Renewed US-Iran tensions have revived interest in gold, but India’s bullion market is showing a shift in buying patterns. While investors are turning to gold ETFs amid ongoing uncertainty, high prices and rising costs are making consumers more selective about fresh purchases, with many opting to exchange old jewellery instead.
Gold had entered a correction phase after touching a record high in January 2026 ($5,200 per ounce), as investors booked profits following a sharp rally over the past two years. The latest geopolitical tensions have revived safe-haven demand, but analysts say gold’s next move will depend on a balance between global risks, interest rates, bond yields, and the US dollar.
On Friday, spot gold was trading near $4,100 an ounce, down from its January highs.
“Unlike previous geopolitical crises, the current environment is characterised by elevated US interest rates, higher Treasury yields and a relatively stronger US dollar, which increase the opportunity cost of holding non-yielding assets such as gold and may limit the magnitude of any sustained rally,” said Saumil Gandhi, Senior Analyst – Commodities at HDFC Securities.
“While geopolitical tensions are generally supportive for gold prices, the medium-term direction will largely depend on whether safe-haven demand outweighs the headwinds from tighter monetary policy, elevated real yields and a stronger dollar,” he said.
Renisha Chainani, Head of Research at Augmont, said the safe-haven response has been more muted than during earlier crises. “Gold’s initial reaction to the Iran conflict has been surprisingly restrained, partly because elevated interest rates raise the opportunity cost of holding a non-yielding asset. Investors are now weighing geopolitical risk against rate expectations simultaneously,” she said.
India’s gold market reflects this divergence between investment and consumption demand. Gold ETFs, which recorded a net outflow of around $61 million in May, saw a sharp recovery in June with inflows of roughly $388 million as investors used the price correction as an opportunity to add exposure.
“Domestic Gold ETFs witnessed a record net outflow of around $61 million in May, reflecting profit-booking and changing global risk sentiment. However, sentiment improved in June,” Gandhi said.
Physical demand, however, remained subdued as record prices discouraged fresh purchases. “During May and early June, physical jewellery demand remained damp. Instead, jewellers reported a noticeable increase in customers exchanging or selling old jewellery to capitalise on elevated prices,” Gandhi said.
The higher import duty on gold is expected to add further pressure on consumption. “With the new import duty on gold rising from 6% to 15%, domestic demand will get impacted, reducing gold consumption in all its forms by 50-60 tonnes. That said, gold will always hold a strong emotional and investment value for Indians, but high prices will make buyers more conscious about the timing and quantity of their purchase,” said Kaushlendra Sinha, CEO, Indian Association for Gold Excellence and Standards (IAGES).
Jewellers, however, say consumers are adapting rather than moving away from gold. Suvankar Sen, MD and CEO, Senco Gold & Diamonds, said buyers are increasingly looking at affordable formats and newer ways of owning the metal. “Weddings, festivals and gifting continue, regardless of what is happening globally. We are seeing more interest in lightweight collections, and in 9K, 14K and 18K jewellery, especially for everyday wear and self-purchase. Exchange has also become a much bigger part of the conversation, with many customers using existing gold to upgrade to something new,” he said.
The recent geopolitical escalation follows a period of profit-booking, when record prices encouraged households and investors to monetise their holdings. Gandhi said rising uncertainty could change that trend. “Record-high prices encouraged many households and investors to monetise accumulated gold holdings through profit-booking. However, after the recent price correction and renewed geopolitical tensions, many investors now perceive limited downside risks and are increasingly optimistic about a recovery in prices,” he said.
Markets are now watching the Strait of Hormuz. A disruption to oil flows could intensify inflation concerns and support gold prices further. Chainani said such a scenario could push international gold prices higher by 15-20%, with the impact amplified in India by rupee weakness.
Gandhi cautioned that higher crude prices could also delay monetary easing. “Higher interest rates, stronger Treasury yields and a firmer US dollar could partially offset gains in the yellow metal,” he said.