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27/05/26
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India Gold Prices Lag After Import Duty Hike
Gold prices in India have risen after the government increased import duties on the metal, but the move has not translated into the full pricing effect that many market participants expected. Domestic prices have advanced only 4% to 6% since the change, well short of the 9% rise in taxes, according to recent World Gold Council analysis. The gap reflects the time needed for higher duties to flow through the physical market, as well as the impact of soft consumer demand.
The local market is now trading at a discount of nearly $150 an ounce to official landed prices, a sharp widening from the average discount of about $14 before the duty increase. Similar duty changes in 2019 and 2022 also pushed domestic prices away from global benchmarks, but the current distortion is more pronounced because the increase was larger and came into effect abruptly.
Timing has also worked against prices. The duty hike arrived after the main wedding-buying season and during a period that is typically weak for gold purchases in India, between mid-May and mid-June. At the same time, supply has remained ample, supported by old jewelry being exchanged for new pieces and by imports that were likely brought in ahead of the policy change.
Higher duties have historically altered India’s gold market by widening the price gap between domestic and international markets. That gap has often encouraged smuggling, and the latest report suggests the incentive has increased again. Past episodes of duty hikes between 2013 and 2026 were generally followed by higher unofficial inflows, while lower duties tended to reduce that activity.
The World Gold Council expects the tax increase to weigh on demand this year. Combined jewelry and bar-and-coin demand could fall by 50 to 60 tonnes in 2026, or roughly 10% from 2025 levels. Weaker investment buying and higher acquisition costs are likely to limit consumption in a market where India remains one of the world’s largest gold consumers, alongside China.
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