India is asking its own citizens to stop doing the one thing they've been doing for centuries: buying gold.
The government raised import duties on gold and silver to 15% from 6%, and pushed platinum up to 15.4%. Prime Minister Narendra Modi then went on stage in Hyderabad and asked voters to put down the gold for a year.
Why The Rupee Is Driving The Duty Hike
India imports almost all of its gold, so every wedding, festival, and "I don't trust the bank" purchase ends up as dollars leaving the country.
With crude oil prices high and the rupee one of Asia's worst-performing currencies, those gold dollars turn into a much bigger drag on reserves.
The full duty stack now adds up to 15%, made up of a 10% basic customs duty plus a 5% Agriculture Infrastructure and Development Cess - what India calls AIDC.
Imports of more than 100 kilograms also need advance approval, with each future shipment tied to a 50% export requirement.
The full breakdown of how slowing Indian imports could move global gold prices is the kind of read we run every morning in Market Briefs - five minutes a day, with a free investing masterclass thrown in when you sign up.
April Imports Already Hit A Near-30-Year Low
Banks halted gold imports for more than a month after India added a 3% goods and services tax earlier this year, which sent April volumes to a near 30-year low.
Banks have since resumed buying, but the new 15% duty is expected to push those numbers back down again.
- Gold ETF inflows in India rose 186% year over year in the March quarter, hitting a record 20 metric tons.
- That's been driven by negative returns in Indian stocks over the past year, which pushed investors into gold.
Industry Officials Warn The Gray Market Comes Back
The last time India had a 15% gold duty, smuggling boomed. Bullion dealers are already telling Reuters the underground trade is about to return.
"Grey markets are likely to become active, as the incentives to bring in gold illegally are high," a Mumbai-based bullion dealer at a private bank told Reuters. "At current price levels, smugglers could make significant profits."
India cut these tariffs in mid-2024 specifically to kill the underground market, and that trade is now coming back.
Worth Watching
The Modi government is betting a one-year cultural pause plus higher duties is enough to stabilize the rupee while crude oil prices stay high. Industry groups think prices and smugglers will both find a way around the policy.
India's wedding season starts in November, and that's the real test for whether the appeal sticks.
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