Gold and Silver Prices See Significant Increase Following Import Duty Hike

Indian Gold and Silver Prices Surge as Government Raises Import Duties

The Indian gold and silver market saw a significant surge in prices on Wednesday, with both metals jumping over 6% each. The increase in prices came after the government raised import duties on gold and silver to 15% from 6% in an effort to reduce overseas purchases of precious metals and ease pressure on foreign exchange reserves.

The MCX gold rate for June futures contracts opened 1% higher at ₹1,54,851 per 10 grams as against its previous close of ₹1,53,442 level. Similarly, the MCX silver rate for July futures contracts opened 4% higher at ₹2,90,224 per kg as compared with its previous close of ₹2,79,062 level. The buying in precious metals intensified, and gold and silver prices hit a 6% upper circuit each.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The central government's move to raise import tariffs on gold and silver is aimed at reducing overseas purchases of precious metals and easing pressure on foreign exchange reserves. According to the circular, the basic customs duty on several categories of gold and silver imports has been increased to 10% from 5%, while the Agriculture Infrastructure and Development Cess (AIDC) of 5% continues, taking the total effective import tax to 15%.

In the international market, gold prices edged lower due to uncertainty relating to the US-Iran war and stronger-than-expected US inflation data, which dimmed hopes for Federal Reserve rate cuts. Spot gold price fell 0.4% to $4,695.99 per ounce, while US gold futures for June delivery gained 0.4% to $4,705.30. Spot silver rose 0.2% to $86.71 per ounce.

Strong domestic investment demand for gold persisted, with Indian gold ETF inflows jumping 186% YoY to a record 20 metric tons in the March quarter. According to market analysts, MCX gold prices may rise to ₹1.68 lakh to ₹1.70 lakh per 10 grams, while silver price may hit ₹3 lakh per kg level.