News and Articles

• Basic customs duty was lifted to 10 percent from 5 percent and the Agriculture Infrastructure and Development Cess was raised to 5 percent from 1 percent.
• Domestic gold prices in India rose close to 6 percent on the announcement, while jewellery stocks faced short-term pressure.
• Silver, too, climbed to about USD 88.24 per ounce on the day, a two-month high, with a 19 percent gain for May alone.
• The probability of a US Federal Reserve rate cut in 2026 fell to about 5 percent on CME FedWatch, removing a key supportive factor for bullion.

India has sharply raised the total import duty on gold and silver to about 15 percent from roughly 6 percent, with effect from 13 May 2026, in a surprise move aimed at curbing bullion outflows, defending the rupee and shoring up foreign exchange reserves. The basic customs duty on both metals was lifted to 10 percent from 5 percent, while the Agriculture Infrastructure and Development Cess was raised to 5 percent from 1 percent. The decision reverses the duty cut announced in 2024, which had reduced the levy from 15 percent to 6 percent and triggered a recovery in official imports and a slowdown in unofficial channels.

Domestic gold prices jumped close to 6 percent immediately after the announcement, while listed jewellery stocks came under short-term pressure on concerns about a near-term demand reset. Silver gained even more sharply on global markets, with spot silver rising to about USD 88.24 per ounce on the day and recording a 19 percent gain for May alone, supported by parallel buying interest from Chinese physical demand. Analysts tracking the Indian market expect spot gold to face resistance near USD 4,770 per ounce and potentially test USD 4,650, while the CME Group FedWatch tool puts the probability of a 25 basis point Federal Reserve rate cut this year at just 5 percent, removing one of the key tailwinds for the metal.

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The macroeconomic logic behind the tariff hike is the current account deficit. India imports almost all of the gold it consumes because domestic production is negligible, and bullion ranks among the country's biggest sources of dollar outflow after crude oil. With the rupee under pressure from elevated crude prices linked to the Iran conflict and from broad dollar strength, the government has used the most direct policy lever available to slow imports. According to past econometric work, every 1 percentage point increase in import duty has tended to reduce annual consumer demand by close to 6 tonnes, although the magnitude varies with festival timing and savings behaviour.

For procurement, the implications are immediate. Jewellery retailers and exporters are reworking landed-cost models, large bullion banks are reassessing dore allocations, and electronics buyers using gold bonding wire face higher input cost inflation. Wedding and festival demand, which is largely non-discretionary, is expected to absorb part of the price shock, but bar and coin investment buying is likely to soften in the immediate term.

Past episodes also suggest that elevated official duty creates room for unofficial flows to expand, with implications for refining supply, hallmarking volumes and tax compliance. Importers will be closely watching whether the government signals that the new duty is temporary, conditional on rupee stability and a narrower trade deficit, since any commentary along those lines would influence forward contracting and inventory positions through the second half of 2026.