Gold and silver prices surge after government hikes import duty to 15 percent

Gold and silver prices witnessed a sharp surge on Wednesday after the government increased import duties on precious metals to 15 per cent from the earlier 6 per cent in a move aimed at reducing imports and easing pressure on foreign exchange reserves.

The revised structure includes a 10 per cent basic customs duty along with a 5 per cent Agriculture Infrastructure and Development Cess on gold and silver imports.

Following the announcement, gold futures on the Multi Commodity Exchange climbed more than 6 per cent, crossing Rs 1.63 lakh per 10 grams, while silver prices surged nearly 7 per cent and approached the Rs 3 lakh per kilogram mark.

Industry bodies and bullion traders expressed concern over the sharp increase in duties, warning that higher taxes could encourage smuggling and lead to the growth of an unofficial parallel market.

All India Gems and Jewellery Council chairman Rajesh Rokde said the gems and jewellery sector may face pressure following the duty hike and the government’s recent appeal to reduce bullion purchases.

According to Rokde, after factoring in customs duty, GST and cess, the cost of gold could rise by nearly Rs 27,000 per 10 grams.

Meanwhile, Senco Gold and Diamonds Managing Director and CEO Suvankar Sen said elevated import duties may continue as long as geopolitical tensions in West Asia persist.

He added that jewellery demand by volume could decline by 10 to 15 per cent as consumers shift towards lighter-weight products due to rising prices.

Market experts, however, believe the long-term investment outlook for gold and silver remains positive because of ongoing geopolitical uncertainty, inflation risks and global safe haven demand.

Gold and silver exchange traded funds also rallied sharply after the announcement, with several gold ETFs recording gains of up to 15 per cent during intraday trade.