Gold Update- Govt’s Big Decision on 60 Tons of Gold, Know the Details

Gold Update: Wanted to buy Gold? Then this article is made for you. In light of the government’s hike in import duty on gold, demand may drop by 50-60 tonnes in 2026. This represents a decrease of about 10 percent compared to last year. The World Gold Council (WGC) mentioned in its recent report on India’s gold market that for the full year of 2026, the total demand for jewellery, gold bars, and coins could fall by approximately 50-60 tonnes, which is around 10 percent less than the previous year. This decline is primarily attributed to the rise in import duty.

There is a Gold Crisis?

The government has raised the import duty on gold from 6% to 15%. This marks the largest increase to date and completely reverses the duty reduction that was put in place in July 2024. Prime Minister Narendra Modi has also urged citizens to avoid purchasing gold for a year. The report indicates that additional factors such as gold prices, income level fluctuations, inflation, and monsoon conditions will also affect annual demand. As a result, gold demand in the country is anticipated to be 10% lower than earlier projections.

The WGC noted that its economic models suggest that alterations in import duties influence gold demand in both the short and long term. However, the effects differ between jewellery and investment products like gold bars and coins. Investment demand is more responsive to changes in duty, while jewellery demand tends to be more stable. According to the WGC, jewellery demand is more significantly influenced by prices and inflation, whereas import duties have a relatively minor effect. This is largely because jewellery is often viewed as essential for weddings and social gatherings.

Impact of imports on investment

The Council stated that investment demand is linked to income levels and import duties. Higher duties and restrictions generally impact demand. In the short term, factors such as inflation and monsoon also influence investment demand. The WGC stated that import data shows a direct correlation between increases in import duties and the flow of unauthorized or smuggled gold. Between 2013 and 2026, smuggled gold increased in most cases after increases in import duties, while it declined sharply after reductions in duties.

After a 4% increase in import duties in 2013, unauthorized gold imports increased from approximately 10 tons in the first quarter to 70 tons by the same period in 2014. The WGC said that despite the duty remaining stable at 10% from the second half of 2013 to the second quarter of 2019, unauthorized imports remained high, averaging 34 tons per quarter.

This indicates that once smuggling networks are established, they are difficult to dismantle. A similar trend was observed even after the duty was increased from 10.75% to 15% in July 2022. Unauthorized imports increased from 17 tons in the second quarter of 2022 to approximately 50 tons by the end of that year and remained elevated for most of 2023.