On 10^th May 2026, Prime Minister Mr. Narendra Modi appealed to the nation to refrain from buying gold, citing rising geopolitical tensions and mounting pressure on India’s foreign exchange reserves.

Three days later, the government took decisive action, raising import duty on gold and silver from 6% to 15% with immediate effect.

This move is not unprecedented. India has often adjusted duties in response to stress on the current account deficit or the currency.

• In 2013, duties were hiked to 10% during a currency crisis.
• In 2019, duties rose to 12.5%, coinciding with strong global safe‑haven demand.
• In 2024, duties were reduced to 6% to curb smuggling by narrowing the gap between official and grey‑market prices.

The chart above captures these adjustments since 2011, showing how duty changes align with macroeconomic pressures.

How does this impact precious metal investments

Physical Gold & Jewellery:

• Prices are rising quickly after the duty hike.
• Jewellery demand may soften temporarily, which is the intended outcome of the policy.

Gold & Silver ETFs/Fund of Funds:

• ETFs that hold physical metals are closely tied to domestic market prices.
• Elevated duties can cause ETFs to trade at a short‑term premium to NAV.

Existing Investors:

• Existing investors of gold and silver benefit from an immediate uplift in value.

The spike reflects domestic pricing, not just global trends

• After the 2013 hike to 10%, gold prices in India rose sharply in the short term but over the next 12-18 months, the global gold price correction pulled domestic prices down too.
• After the 2019 hike to 12.5%, gold continued its strong upward trajectory, driven by global safe-haven demand.
• After the 2024 reduction to 6%, gold kept rising, showing that prices already reflect global demand, not just duty levels.

Import duty hikes create short‑term price spikes in India, but medium‑ to long‑term trends are driven by global markets. Central banks worldwide, including the RBI, continue to accumulate gold, reinforcing its role as a safe‑haven asset.

Our updated view

We remain bullish on metals as a means of diversification and a hedge for the portfolio in times of uncertainty. However, keeping in mind the Prime Minister’s appeal and the slightly reduced risk-adjusted returns in this new duty environment, we suggest capping fresh investments in gold at 5% of your portfolio.

Continue to hold existing gold investments, whether in ETFs, Sovereign Gold Bonds, or physical form. Avoid panic selling — current price spikes have already lifted portfolio values.

Stay calm, stay invested, and let’s keep building wealth together, one thoughtful step at a time.

Best Regards

Neeru Seal

Partner

Alpha Research Team

 
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