India's gold prices soar 7% after steep import duty hike to 15%

Gold prices in India surged sharply on May 13, 2026, after the government raised import duties from 6% to 15%. The sudden hike followed Prime Minister Narendra Modi’s call for citizens to avoid buying gold for a year. His appeal aimed to ease pressure on foreign exchange reserves and reduce the country’s import burden. The price of gold futures on the Multi Commodity Exchange (MCX) jumped nearly 6% to 7% in a single day, reaching over ₹1,63,000 per 10 grams. This spike came after the government increased import duties on both gold and silver. The move was part of broader efforts to stabilise the economy amid rising crude oil prices and geopolitical tensions, which have weakened the Indian rupee.

Prime Minister Modi urged the public to refrain from gold purchases for at least a year. His request sought to curb demand and conserve foreign exchange, as gold imports rank second only to oil in India’s import expenses. However, the jeweller lobby criticised the duty hike, warning it could fuel illegal smuggling. Gold holds deep cultural and financial significance in India. Most demand comes from private buyers who see it as a hedge against inflation or collateral for loans. Banks and Non-Banking Financial Institutions (NBFCs) frequently offer gold-backed credit, reinforcing its popularity. Industrial use accounts for just 15% of total demand, with scarcity and high demand sustaining its value. Past schemes to mobilise domestic gold, like the 2015 Gold Monetisation Scheme (GMS), have had limited success. Since its launch, the GMS has collected only 31.16 metric tonnes—far below the vast private holdings in the country. The government could explore new measures, such as asking the Reserve Bank of India (RBI) to introduce schemes offering premium prices for gold deposits. Another option might be restricting gold loans from banks and NBFCs to support such initiatives. Historically, gold’s role in global finance has shifted. The USA established a gold exchange standard in 1944 but abandoned it in 1973 when its gold reserves could no longer back the dollars in circulation worldwide.

The government’s latest measures aim to reduce gold imports and ease economic strain. Yet their effectiveness remains unclear, given the metal’s deep-rooted role in Indian households. With smuggling risks rising and past schemes yielding little, the impact of higher duties and public appeals will depend on how buyers and markets respond.