Gold and silver just became more expensive in India after the government sharply . The move has quickly stirred the bullion market, pushing prices higher and raising a simple but important question for buyers, i.e., will people still continue purchasing, or will demand finally slow down?
The decision comes shortly after Prime Minister Narendra Modi urged citizens to avoid buying gold for a year, at a time when economic stress linked to global tensions and pressure on foreign exchange reserves is being closely watched.
India, which depends heavily on imports for gold and silver, has taken this step to reduce imports, narrow the trade deficit, and support the rupee, which recently slipped to an all-time low of 95.75 against the US dollar.
The new structure includes a 10% basic customs duty along with a 5% Agriculture Infrastructure and Development Cess (AIDC). Together, they raise the overall tax burden on imported gold and silver, making them costlier in the domestic market.
The aim is clear, i.e., reduce imports, protect foreign exchange reserves, and help stabilise the rupee during a period of global uncertainty and rising crude oil prices.
India is the world’s second-largest consumer of gold and the largest consumer of silver, so even small changes in policy tend to have a big impact on prices and buying behaviour.
Markets responded immediately. Domestic bullion prices surged on the MCX, with gold opening with a sharp gap-up move of around 6%. Analysts say the higher duty has widened the premium between global and Indian prices, pushing local rates higher.
Kaveri More, Commodity Analyst at Choice Broking, said the move has triggered both volatility and bullish sentiment in the near term.
“India’s decision to raise the effective import duty on gold and silver from 6% to 15% triggered a sharp rally in domestic bullion prices, with MCX Gold opening with a gap-up move of +6% amid concerns over tighter supply and higher landed costs. The move was aimed at curbing imports, protecting forex reserves, and supporting the rupee during a period of elevated global uncertainty and rising crude oil prices,” she said.
She added that the near-term trend remains cautiously positive.
“The near-term bias is moderately bullish, with support seen at 160000–157000 and resistance at 165000–180000. The higher duty widens the India premium over global prices and supports local gold rates, but the move may also trigger volatility and profit-booking after the initial spike,” she noted.
The impact was not limited to bullion prices, as jewellery company shares also slipped amid concerns over weaker demand and rising input costs.
“Major gold stocks under pressure include Titan Company, Kalyan Jewellers, Senco Gold, Thangamayil Jewellery, and PC Jeweller. Shares of Kalyan Jewellers and Senco Gold fell up to 6%, while Titan and other jewellery counters also traded weak as investors anticipated slower consumer demand due to higher gold prices,” said More.
The Gem & Jewellery Export Promotion Council (GJEPC) welcomed the government’s broader intent but warned that higher duties may not achieve the desired impact on imports.
GJEPC Chairman said the industry remains aligned with national priorities but stressed the need for a balanced approach.
“The Gem & Jewellery Export Promotion Council (GJEPC) acknowledges the Government’s decision to raise gold import duty to 10% from 5% and Agri cess to 5% from 1%. As an industry, we remain committed to the spirit of ‘Nation First’ echoed by Honourable Prime Minister Shri Narendra Modi,” he said.
He added that the industry has already proposed several measures to reduce import dependence, including promoting lower caratage jewellery, encouraging gold recycling, and revamping the Gold Monetisation Scheme.
However, he also raised concerns about the effectiveness of duty hikes in the long run.
“GJEPC’s consistent position is that hiking import duties rarely curbs gold imports—it merely inflates prices. Despite gold prices doubling recently, imports have not declined proportionally. Such measures often fuel smuggling and escalate export costs,” he said.
The council also warned that exporters and MSMEs could face liquidity pressure due to higher working capital requirements, especially with rising costs of duty-free gold procurement.
With prices already elevated and duties pushing them further, the big question now is whether Indian consumers will continue buying gold for weddings, festivals and investments, or whether demand will finally cool off.
Analysts suggest that while short-term buying may remain strong due to cultural demand, higher prices and volatility could slow discretionary purchases. At the same time, global uncertainty and inflation concerns may still keep gold attractive as a long-term asset.
For now, the market appears caught between two forces, i.e., policy-driven price support and demand-side caution.
Whether buying slows down or stays strong will become clearer in the coming weeks, but one thing is certain: gold and silver have once again become the centre of India’s economic conversation.