India has raised import duties on gold and silver to 15% from 6%, a move aimed at curbing demand and stabilizing the rupee amid rising inflation and trade deficits. The decision comes as global gold prices fluctuate due to U.S. inflation data and geopolitical tensions.
Immediate Action & Core Facts
India’s government imposed a 10% basic customs duty and a 5% tax on gold and silver imports, effective immediately. The move follows Prime Minister Narendra Modi’s call to citizens to reduce bullion purchases for a year to ease pressure on the rupee. Meanwhile, gold prices fell as U.S. wholesale inflation accelerated in April, reinforcing expectations of prolonged high interest rates, which negatively impact non-interest-bearing assets like gold.
Deeper Dive & Context
Economic Pressures on India
India’s gold demand surged in early 2026, with imports rising to 83 tonnes monthly from 53 tonnes in 2025, driven by strong investment demand. In value terms, demand nearly doubled year-on-year to $25 billion in Q1 2026, exacerbating the country’s trade deficit, which hit $330 billion in FY2026. Gold and silver accounted for nearly 11% of total imports, while crude and petroleum products made up 22%.
Global Gold Market Dynamics
Gold prices dropped as much as 1% after U.S. producer price index data showed a 6% year-on-year increase, the fastest pace since 2022. The core measure, excluding food and energy, rose 5.2%, the largest advance in over three years. Higher U.S. Treasury yields and expectations of a hawkish Federal Reserve further weighed on gold, which pays no interest. Meanwhile, silver prices surged to a two-month high, supported by renewed buying in China.
India’s Currency and Energy Challenges
The rupee has weakened due to rising energy costs, with India importing nearly 85% of its fuel needs. The Strait of Hormuz, a key route for crude and LNG, has been disrupted by geopolitical tensions, further straining the country’s trade balance. Analysts note that while lower gold imports could help reduce current account outflows, energy costs remain the primary driver of currency pressure.
Market Reactions
Top traders on the Shanghai Futures Exchange have been steady buyers of silver over the past month, according to TD Securities. The move reflects broader commodity market dynamics amid global inflation and geopolitical risks.