MW India has increased tariffs on gold. Why it might paradoxically be a positive signal for the metal.

By Jules Rimmer

India lifts import tax on gold and silver from 6% to 15%

Indians are among the largest buyers of gold in the world. Manjunath Kiran/AFP via Getty Images

The news that Indian Prime Minister Narendra Modi increased tariffs on gold and silver might have a different impact than first imagined.

Modi on Wednesday increased tariffs on gold (GC00) and silver (SI00) from 6% to 15%. The step was introduced after Modi requested during a speech on Sunday that Indians should not buy gold. "In the current situation, we must place great emphasis on saving foreign exchange," he said.

Ross Norman, chief executive officer at Metals Daily, a news platform devoted to precious metals, interprets the news like this: "Probably mildly bearish in the short term but longer-term, this reinforces the argument for owning gold - and in our view, that is the only way it should be played."

Since hostilities kicked off in the Strait of Hormuz one of the biggest casualties of the crisis has been the Indian rupee (USDINR). Against the dollar, the currency has dropped more than 6% to a record low.

With the crude price (BRN00) spiking, India's energy vulnerability has been exposed because it imports 90% of its oil requirements and as a consequence, the trade deficit has ballooned.

The threat of fuel shortages has become a pressing concern, according to Udith Sikand, analyst at Gavekal Research. "When this crisis first broke out in late February, India was estimated to have around 60 days worth of fuel in its strategic and commercial reserves," he notes. With the trade deficit widening as imports grow faster than exports, it's putting downward pressure on the rupee in perhaps self-reinforcing cycle.

Every $10 increase in the price of a barrel of oil, adds roughly $10 billion to $15 billion to India's import bill. Importing lots of gold at the same time was only exacerbating the situation.

Norman, writing after the announcement was made on Wednesday, emphasized how important gold is to Indians and the manifold motivations they have for buying it: "weddings, festivals, reliable savings, culture and fashion, and conspicuous displays of wealth." At bottom, however, Norman points out, "gold is an asset of last resort - and Indians know that." For Norman, Modi's measure shows "a real whiff of panic" and "that makes it good and bad for gold simultaneously."

So while the gold market may see a major reduction in demand from the second-largest consumer, according to the India Bullion and Jewellers Association, what Modi has done is reinforce "the fundamental reason for owning it."

Despite the ostensibly adverse news, the gold price had edged higher in Wednesday trading and the continuous futures contract is currently about 0.4% higher at $4,705 per ounce. So far this year, gold has delivered an 8% return but it is almost 16% off its intraday peak and all-time high set in January at $5,626.

While gold has been in consolidation mode after its rally in 2025, it's increasingly been accumulated in India, less for adornment and more as an asset of last resort. India's gold imports have averaged 83 metric tons, up from 53 tons a year ago, Norman notes. In value terms, that's almost double, given the price appreciation.

The price of silver was also undeterred by the announcement and continued its recent strengthening trend, adding 1.6% Wednesday to almost $90 per ounce. Many of themes fuelling the gold rally, like a weakening dollar, inflation fears, the accumulation of sovereign debt and currency debasement were also applicable to silver.

The relative illiquidity of silver and its lower institutional ownership amplified its moves and in the last 12 months it has jumped 168%, despite a 30% retreat from its all-time high clocked up in January.

-Jules Rimmer

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May 13, 2026 09:36 ET (13:36 GMT)

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