India Gold Market Update: Import Tightening

India has raised its gold import duty from 6% to 15% to protect the INR, leading to domestic market discounts and a projected 10% decline in annual demand.

Key Takeaways

• 1.Gold import duty was sharply increased from 6% to 15%, marking the steepest increase on record.
• 2.Domestic gold prices are currently at a deep discount (~$150/oz) relative to landed prices due to weak seasonal demand and high supply.
• 3.Higher duties historically correlate with increased smuggling/unofficial gold inflows (correlation 0.52).

Table of Contents

• Highlights
• Policy actions on gold imports
• The pattern of gold import duty revisions
• Price adjustment - the tariff lag effect
• Domestic gold prices trade at a deep discount post duty revision
• Market and trade reaction and expectations
• Import duties and smuggling
• Limited duty sensitivity of imports
• Gold ETFs: flows slow
• Demand moderation

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