A weak monsoon is the quiet risk to India's Diwali gold season

India's jewellers spend most of the year preparing for the five weeks around Dhanteras and Diwali. This year they go into the season with lower prices than they had in August, a heavy import duty, and a problem that has nothing to do with markets: the monsoon.

By late September rainfall was running about 15% below average, Heraeus said in a note reported by Kitco. That matters because rural households account for more than half of India's gold consumption, and a poor harvest leaves farming families with less cash to spend on jewellery for weddings and festivals.

India consumed 768 tonnes of gold in 2025, around 15% of global demand, so a soft rural season shows up in global demand figures too.

A duty that changed the market in May

The monsoon lands on a market that was already reshaped this year. On 13 May the government raised the import duty on gold and silver from 6% to 15%, CNBC reported, in an effort to slow imports and support a falling rupee. Within days Indian dealers were offering discounts of up to $207 an ounce below official domestic prices, a record, according to Reuters. A Mumbai bullion dealer told the agency at the time that demand had virtually disappeared and scrap supplies had increased.

Discounts of that size tend to narrow once buyers adjust to a new duty level, and the World Gold Council's India report for the second quarter showed volumes easing while rupee spending on gold still hit a record for a second quarter. Going into Diwali, then, prices are high enough to hold volumes down but not high enough to stop people spending.

Jewellers do not agree on the season

The trade is split. Colin Shah, managing director of Kama Jewelry, expects festive volumes to fall 10 to 15% from last year. Prithviraj Kothari of the India Bullion and Jewellers Association expects growth of 15 to 20%. Both camps describe the same shift in what customers buy: lighter pieces, smaller items and more lower-karat jewellery, chosen to keep the bill within a budget set when prices were lower.

Part of the gap comes down to who is doing the selling. Organised chains, which have been gaining share from independent shops in places like Mumbai's Zaveri Bazaar, are better placed to offer lightweight collections and exchange schemes for old gold. Independent jewellers carrying expensive stock bought earlier in the year are under more pressure.

What September's fall does for buyers

The 6% drop in the dollar price of gold in September helps, though less than the headline suggests. How much it lowers the rupee price depends on the currency, and with the import duty at 15%, a larger share of what Indian buyers pay is now tax rather than metal. A fall in international gold of $100 an ounce lowers the landed cost by more than $100 once duty is applied, which is one reason jewellers watch the international price closely in the weeks before Dhanteras.

What to watch

The domestic premium or discount over the next four weeks is the clearest signal. A discount that widens into Dhanteras would confirm that buyers are staying away; a move to a premium would mean they are using the dip. Our premium tracker updates every Monday.