Gold Is 25% Below Its Peak Even as China and India Buy More: What Is Going On?

Two of the world's biggest gold buyers are adding to their purchases. China's central bank has been buying for 23 months in a row, and India is entering Dhanteras, Diwali and the wedding season. Yet international gold is trading near $4,185 an ounce, roughly 25% below the intraday high near $5,600 set on 29 January 2026.

That looks like a contradiction: if big buyers are buying, why is the price falling? This guide separates the forces at work, explains each in plain language, and shows what would have to change before demand can turn into a lasting recovery.

Why has gold fallen about 25% from its peak?

The fall started from an unusually crowded position. Global gold investment demand reached about 2,175 tonnes in 2025, up 84% on the year before (World Gold Council, WGC). That wave of buying pushed the price to its January peak, and it also meant many investors held gold on borrowed money or on momentum alone. Positions like that unwind quickly when the story changes.

The decline was not one straight line. It came in three distinct episodes, each with a different cause.

January: a shift in rate expectations

On 30 January, President Donald Trump named Kevin Warsh as his pick to lead the US Federal Reserve. The dollar rebounded and traders reassessed where interest rates were headed, while others booked profits after the sharp rally. Reuters reported spot gold down 9.5% at its afternoon snapshot that day.

The logic is simple. Gold pays no interest. When investors expect tighter policy and a stronger dollar, holding an expensive, non-yielding asset looks less attractive, and momentum buyers leave first.

March: forced selling, not a change of view

The London benchmark fell 11.8% in March. The WGC put most of this down to investors cutting leveraged positions and raising cash, with global gold ETFs shedding about 84 tonnes in the month. Higher real yields and a firmer dollar played a part, but the main driver was liquidation.

This is a useful lesson: geopolitical stress does not guarantee a gold rally. When investors need cash to cover losses elsewhere, they sell what they can sell easily, and gold is easy to sell.

September: the rate hike makes the pressure real

On 16 September the Fed raised its policy range by 0.25 percentage point to 3.75%–4%, saying inflation remained elevated. Rate pressure was now an actual decision, not just speculation. September's data show the competing forces side by side:

Source: World Gold Council, September 2026 market commentary and ETF report (7 October 2026). Futures exposure is measured in gold-equivalent tonnes and does not represent physical bullion deliveries.

Read together, the numbers show supportive demand competing against expensive money, a strong dollar and shrinking speculative positions. Strong buying in one corner of the market can sit alongside a falling price.

If you want the fuller macro framework behind this, our guide on why gold is falling and what investors should do now walks through bond yields, the dollar and the data releases that move gold.

How much gold is China buying?

China's demand has two separate parts: the central bank adding to official reserves, and the wider market importing gold for investors, jewellers and inventories. They are not the same thing.

Central bank reserves

Data from China's State Administration of Foreign Exchange show reserves rising from 76.73 million ounces at the end of August to 77.47 million ounces at the end of September. That 740,000-ounce increase is about 23 tonnes and takes reported reserves to roughly 2,410 tonnes. It was the People's Bank of China's 23rd consecutive monthly purchase and its largest monthly addition in about three years.

Imports and private investors

Separately, customs data reported by the Financial Times and Moneycontrol show China importing more than 1,000 tonnes of gold worth a record $158.8 billion in January–August 2026. That is already more than the 886 tonnes imported in all of 2025.

Private investors were buying too. The WGC reported further inflows into Chinese gold ETFs in September even as prices fell, helped by lower government-bond yields and renewed weakness in domestic shares.

What this means: Chinese demand is becoming more investment-driven, which is a broader base than jewellery alone. But investment flows can reverse when prices, interest rates or competing assets look better. And a central bank's reserve buying serves long-term safety goals, so it says little about the right entry price for an individual investor.

For more on why official buyers keep adding gold, see why everyone still wants gold: central banks, Indian buyers and gold's changing role.

Can India's festive season support gold prices?

India's seasonal demand has real weight. In its January 2023 study of the Indian jewellery market, the WGC estimated that about 40–60 tonnes of gold are sold around Diwali and Akshaya Tritiya combined, and that bridal jewellery makes up 50%–55% of the jewellery market. These are structural estimates from past years, not a forecast for Dhanteras 2026.

Recent data confirm that festivals and weddings lift buying. The WGC's 2025 report found fourth-quarter jewellery demand rose on the previous quarter. But full-year jewellery demand still fell 24% to 430.5 tonnes because high prices hurt affordability.

That gap between rupees and tonnes is the key to this year. Families keep their planned purchases but choose lighter pieces, exchange old jewellery or stick to a fixed budget, so sales in rupees can look strong while the tonnes bought fall. India's higher import duty adds to this; our post on the price outlook before Diwali covers how the 15% import duty and Q4 forecasts are shaping demand.

The WGC's 17 September India update reported resilient wedding buying and steady physical investment demand. It expects demand to improve as the festive and wedding season goes on, but warns that high prices and volatility could hold back discretionary purchases.

One more detail matters for the global price. As of 11 September, Indian prices were about $78 an ounce below import parity, which means local supply was ample relative to demand, partly because people were exchanging old jewellery. If festive buying is first met from existing stock, its main effect is to narrow that discount, not to send new import orders abroad. Only demand strong enough to need fresh imports would move the international price.

Finally, Dhanteras comes every year and traders already know it. What would change the picture is actual buying, especially in tonnes, coming in above expectations while global investment conditions improve.

If you are planning purchases, our guide to buying gold during festivals: Dhanteras, Diwali, Akshaya Tritiya and shubh muhurat covers timing and what to check, and you can budget a jewellery purchase with the gold jewellery calculator.

Can Chinese and Indian demand create a floor for gold?

They can help prices stabilise, but the evidence does not show a guaranteed floor. September is the clearest test: ETFs added gold while the benchmark fell sharply.

The reason is that several markets set the price at once. Jewellery and bullion purchases drive physical demand. ETFs, futures and over-the-counter trades drive investment exposure and price discovery. Futures positions can change without any physical gold moving, so comparing tonnage numbers across these markets needs care.

Different buyers can also move in opposite directions. The WGC estimates central banks bought about 289 tonnes in the second quarter of 2026, while global gold ETFs saw net outflows of about 45 tonnes in the same quarter.

A durable base needs evidence that selling pressure is fading while buyers stay active through more volatility. Useful confirmation would be:

• Firmer physical premiums in major markets.
• Stronger replenishment and import demand.
• Sustained ETF accumulation rather than a one-month inflow.
• Prices holding steady over several weeks, not rebounding for a single day after a headline.

What would help gold recover sustainably?

A strong recovery needs persistent demand plus a reduction in the forces pushing against it. Not every indicator has to improve at once, but several should reinforce each other.

Real yields deserve special attention. A real yield is what a bond pays after subtracting expected inflation. When it rises, gold is under pressure, because investors can earn more without holding gold. A single softer inflation reading, or talk of a future Fed cut, does not show that this pressure has eased.

Energy prices cut both ways. Geopolitical disruption can raise demand for protection, but an oil-driven jump in inflation can also lift rate expectations and strengthen the dollar. What matters is which response wins, not whether tension exists.

There is also a route through fiscal worries. The WGC's September commentary pointed to unusually persistent UK gold ETF demand and asked whether concern about government finances was behind it. The findings were tentative, but they show why rising bond yields are not automatically bad for gold in every setting.

On the other side, a stronger dollar, persistently high real yields, renewed futures selling or weaker investment demand would undercut the recovery case. Festive jewellery buying could still happen in that environment without turning the wider trend.

How should you think about gold in your portfolio after the fall?

Gold deserves consideration as a measured diversifier after a pullback, especially if your current exposure is small and your horizon can handle volatility. The case is weaker if you want a fast return to January's record, or if gold already makes up a large share of your family's wealth.

Gold can complement shares and bonds because its price drivers are different. But it pays no regular income and can lose a lot of value. A lower price improves your entry level compared with January; it is not the same as valuation evidence like a company's earnings or cash flows. The old high is a reference point, not proof of fair value.

A practical review starts with four steps:

Define the purpose. Decide whether gold is meant to diversify equities, store value, or meet a future need for physical gold. Each purpose suggests a different product and holding period.

Count what you already own. Include financial gold and meaningful physical holdings. Jewellery kept for family use counts toward wealth but is harder to rebalance.

Fix the size before judging the next price move. A set allocation makes the decision less dependent on finding the exact bottom. Phased purchases spread your entry dates, though they cannot prevent losses if gold keeps falling.

Check liquidity and costs. Compare how closely a product tracks gold, its ongoing charges, and the terms for getting in and out. Emergency money and near-term commitments need their own liquidity plan.

Here is a worked example. Take a ₹10 lakh portfolio with an illustrative 10% in gold, which is ₹1 lakh. If that gold falls another 20% and everything else stays flat, you lose ₹20,000, or 2% of the portfolio. If gold rises 20%, it adds 2% to the portfolio. The 10% weight only demonstrates sizing; it is not a recommended allocation.

To test your own numbers, use the gold investment calculator, check today's price on the live gold rate page, and compare your options in our guide to the best way to invest in gold in India. If you are weighing an ETF specifically, see how gold ETFs work in India. Selling existing jewellery? The gold resale calculator shows what you could realistically get.

Sources

• World Gold Council, Gold Demand Trends and Goldhub research: gold.org/goldhub
• World Gold Council, September 2026 market commentary and ETF report (7 October 2026): gold.org
• World Gold Council, India gold market update (17 September 2026): gold.org
• World Gold Council, India jewellery market study (January 2023): gold.org
• China State Administration of Foreign Exchange (SAFE), official reserve data, end-September 2026: safe.gov.cn
• Reuters, spot gold report of 30 January 2026 on the Fed nominee announcement: reuters.com
• Financial Times and Moneycontrol, reporting on China customs gold import data, January–August 2026: ft.com, moneycontrol.com
• US Federal Reserve, policy statement of 16 September 2026: federalreserve.gov

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Goldmitra's Team

Gold Buying Expert, 10+ years in Gold Markets

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