India, the world’s second-largest gold market after China, has moved from a sharp domestic correction in June to price stability in July and a recovery from early August. In rupee terms, gold has risen about 7% through the first two weeks of August, while international prices gained about 9% over the same period, with rupee strength tempering the local move. Against this backdrop, the World Gold Council pointed to shifting monetary policy expectations, a weaker US dollar and renewed inflows into gold ETFs as drivers of the rebound.
Despite firmer prices, gold has continued to trade at a discount in India, suggesting ample supply, supported by exchanges of old jewellery for new. That discount narrowed from as high as $100 per ounce in mid-May and early June to around $45 in mid-August. After two weak months, imports rose in July: volumes doubled from 20 tonnes in June to an estimated 40–45 tonnes. Fund data showed Indian gold ETF holdings up 1 tonne, valued at ₹15.6bn ($163m), taking totals to 120 tonnes with AUM of ₹1,733bn ($18.1bn); accounts rose by 57,000 to 12.53m. MCX India volumes reached 14.9 tonnes in July versus a 13.5-tonne three-month average.
Trading Opportunities in a Recovering Market
We are seeing a strong recovery brewing in the Indian gold market after a sharp correction earlier this summer, creating a prime buying opportunity for derivative traders. In early August, domestic gold prices in India gained about 7 percent, while international prices surged by 9 percent. With the major autumn festival season just around the corner, we recommend traders build long positions in MCX gold futures to capture this upward momentum.
Our bullish outlook is supported by physical demand data, as gold imports into India doubled to an estimated 40-45 tonnes in July compared to just 20 tonnes in June. Historical data shows that a drop in the domestic gold discount—which narrowed from $100 per ounce in June to $45 in mid-August—signals tightening supply and rising consumer appetite. This physical market tightness typically spills over into the derivatives market, driving up near-month contract prices.
Strategies and Macro Tailwinds
Trading volumes on the Multi Commodity Exchange (MCX) rose to 14.9 tonnes in July, indicating that institutional participation is picking up ahead of the demand surge. To manage potential volatility, we suggest traders utilize bull call spreads on September and October gold options rather than naked futures. This strategy limits our downside risk while allowing us to profit from the anticipated price surge as jewelers replenish their inventories.
On a macro level, shifting global monetary policies and a weakening U.S. dollar continue to act as tailwinds for precious metals. Recent financial data shows global gold ETFs have resumed net inflows, further securing a strong floor for prices. We believe these combined factors make a compelling case for keeping a long bias on gold derivatives over the coming weeks.
