Gold and silver prices in India surged sharply on Wednesday after the government raised import duties on precious metals, making purchases more expensive in the domestic market.
futures on MCX jumped Rs 9,206, or 6%, to Rs 1,62,648 per 10 grams in early trade. futures also rallied strongly, rising Rs 16,743, or 6%, to Rs 2,95,805 per kg as of 9 am.
The sharp rise came after the
The move includes 10% basic customs duty, and 5% Agriculture Infrastructure and Development Cess (AIDC).
The duty hike immediately increased the landed cost of imported gold and silver in India, pushing domestic futures prices sharply higher.
India imports most of its gold and silver needs. Higher import duty raises the overall cost for traders, jewellers and consumers.
The government’s move comes at a time when India is facing pressure from:
The rupee recently hit a record low of 95.75 against the US dollar, increasing concerns over the country’s foreign exchange outflows.
The duty hike is aimed at reducing gold and silver imports, narrowing the trade deficit, and supporting the rupee.
The decision also comes days after for weddings for one year amid the ongoing economic pressure caused by the global energy crisis.
The Prime Minister had said conserving foreign exchange had become important as crude oil prices remained high globally.
India is one of the world’s biggest gold importers, and economists often see large gold imports as a pressure point during periods of high oil prices and rupee weakness.
Interestingly, global gold prices moved lower even as Indian prices surged due to the import duty hike.
Spot gold fell 0.4% to $4,695.99 per ounce, while US gold futures for June delivery gained 0.4% to $4,705.30.
Analysts said stronger-than-expected US inflation data reduced hopes of interest rate cuts by the US Federal Reserve, putting some pressure on international gold prices.
Recent US data showed consumer inflation rose further in April, with annual inflation recording its biggest increase in three years.
According to CME Group’s FedWatch tool, traders are now pricing in a 30% chance of a US rate hike by December.
The sharp jump in domestic prices could affect:
Jewellers and traders are expected to closely watch consumer reaction over the next few days as higher duties make precious metals significantly more expensive.