Gold and silver markets came under pressure after the Indian government sharply increased import duties on precious metals from 6% to 15%, triggering steep discounts and heightened volatility across the bullion trade. The move, aimed at curbing non-essential imports and protecting foreign exchange reserves amid rising geopolitical tensions and higher crude oil prices, led to a sharp rise in domestic bullion prices and weaker physical demand.
Bullion dealers reported unusually deep discounts in the domestic market as investors rushed to book profits following the sudden price surge. Gold discounts in India widened to more than $200 per ounce over official domestic prices, compared with around $17 per ounce a day earlier, reflecting heavy selling pressure and subdued retail buying.
The duty hike pushed gold and silver futures sharply higher on the Multi Commodity Exchange (MCX), with gold futures rising more than 7% to above ₹1.64 lakh per 10 grams and silver futures nearing ₹3 lakh per kilogram. Retail bullion prices also climbed significantly across major cities including Mumbai, Delhi, Chennai, Bengaluru, and Hyderabad.
Government officials said the increase in customs duty was intended to moderate avoidable imports and reduce pressure on India’s external account as the country faces elevated energy import costs linked to the ongoing West Asia crisis. The revised structure includes a 10% basic customs duty along with a 5% Agriculture Infrastructure and Development Cess (AIDC), taking the effective import tax to 15%.
Industry participants, however, warned that the steep duty increase could weaken formal bullion trade and encourage higher gold smuggling activity, which had declined after tariff reductions in 2024. Jewellery traders and retailers also expressed concerns over weaker consumer demand as rising prices may affect wedding and festive season purchases in the near term.
