India’s bullion market may be headed for a sharp reset after the government significantly raised import duties on gold and jewellery, a move analysts believe could cool demand, reduce imports, and alter investor behaviour across the precious metals segment.
Speaking to ET Now, Mohammed Imran from Mirae Asset Sharekhan said the latest increase in import duties, coupled with currency weakness and elevated global inflation pressures, is likely to push domestic gold prices sharply higher and weigh heavily on consumption trends over the next year.
The government had already imposed an additional 3% duty earlier this year amid heightened geopolitical tensions and rising global uncertainty. According to Imran, the impact became visible almost immediately, with April gold imports falling to their lowest levels in nearly three decades.
“So, this has already been indicated as we have seen that government has imposed 3% duties from April since this war began. That is why we are seeing that imports has declined to three decades low in the month of April which was down around 15 tonnes from 100 tonnes in January and now, this action has come from the government,” said Mohammed Imran.
He added, “So, we expect that MCX prices could see or the domestic prices could see landing cost somewhere around 1,67,000 to 1,68,000 and that could directly have an impact on the demand side as well.”
According to market estimates, India’s gold demand stood near 660 tonnes last year. However, analysts now expect a meaningful slowdown in purchases as elevated prices reduce affordability for consumers.
“Last year we have seen that domestic demand was around 660 tonnes which further in 2026 we expect that demand could see 10% to 15% drop because of this action from the government and rupee has also depreciated by 5% to 6%, so all these are going to have an impact on the demand,” Imran noted.
Import Bill Under Pressure
Despite lower import volumes in recent years, the rally in international gold prices has kept the overall import bill elevated. Analysts believe the latest duty hike, along with the 3% IGST burden, could significantly curb inbound shipments and help narrow India’s current account deficit.
“As I already mentioned that we will see imports coming down because you see that the current account deficit like $72 billion was added by gold. So, government wants to curb this,” Imran said.
“So, we could see that this import duty could have an impact on the current account deficit where we could see that 20% drop. So somewhere gold’s contribution to the current account deficit should be around 50 billion to 55 billion if all these duties could play out on the curbing the demand.”
At the same time, global inflation concerns continue to support bullion prices internationally. Imran pointed to stronger-than-expected US inflation data as a key driver behind persistent strength in gold prices.
“Internationally we are already seeing that inflationary pressures are moving higher because yesterday's inflation from the US numbers were like they had beaten the street expectation of 3.7% on the benchmark CPI numbers and even the core numbers were higher at 2.8% year-on-year,” he said.
ETFs May Also Feel the Heat
Higher domestic gold prices may not only affect jewellery demand but could also impact investment demand through exchange-traded funds.
India’s gold ETF segment had seen healthy inflows during the first quarter, but analysts believe rising acquisition costs could slow fresh investments.
“Yes, so ETF, we have seen that in quarter one our gold ETF demand from India was around 20 tonnes. Even this would have a significant impact because ETFs have to back their inflows by gold, so even they will have an impact,” Imran said.
“So, yes, definitely we could see that higher gold prices would effectively have an impact on ETFs inflows as well.”
Silver Emerges as a Parallel Story
While gold faces pressure from rising duties, silver may continue to benefit from tightening global supply conditions and structural deficits in industrial metals.
Imran highlighted that silver production is closely tied to zinc and copper refining, sectors already facing operational disruptions globally.
“So, silver is an outcome of zinc and copper refining, so two-third of the silver mined or refined comes out from the refined capacities of lead, zinc, and copper,” he explained.
Supply disruptions in Africa and Latin America, combined with refinery shutdowns by major global miners, are expected to tighten availability further.
“Overnight we have seen that Glencore which is one of the leading global giant mining company, they have reduced, they have shut down one of their zinc smelting capacities,” he said.
According to Imran, this could have implications for companies such as Hindustan Zinc and other mining firms exposed to zinc and copper markets.
Silver prices have already rallied sharply in recent sessions, climbing nearly 20% over the past week amid growing supply concerns.
“So, expect that around 50 to 60 million ounce of silver will remain in deficit this year and prices, although we are already seeing that demand destruction is there but because of this deficit concern we expect that silver should remain elevated,” Imran said.
He further added, “We should see that by end of year 2026 because of the supply constraint internationally silver could see prices of around $100.”
