India Gold Demand Falls: Why Indians Are Buying Less Gold After Import Duty Hike

India’s gold market has seen a steep contraction in demand, with consumption falling by nearly 70% following a sharp increase in import duties earlier this month. Data shows demand dropped to 7.5 tonnes in the fortnight ending May 27, compared to around 25 tonnes in the same period last year, marking one of the sharpest declines in recent years.

The slowdown comes after the government raised import duty on gold from 6% to 15% effective May 13, pushing the total effective tax burden on gold purchases to 18.45% including GST. The policy shift, combined with global price volatility and geopolitical tensions, has significantly weakened retail buying sentiment. Gold Rate Today, June 2, 2026: Check 22K and 24K Gold Prices in Delhi, Mumbai, Chennai and Other Cities.

India Gold Demand Drops to 7.5 Tonnes After Policy Shock

The primary factor behind the collapse in demand is the steep increase in import duty announced by the government. The total tax burden on gold has nearly doubled, rising from 9.18% to 18.45% after the inclusion of GST.

Officials said the move was aimed at supporting the Indian rupee, cushioning the impact of high global crude oil prices, and insulating the economy from geopolitical risks in the Middle East. However, the immediate effect has been a sharp slowdown in consumer purchases, particularly in the jewellery segment. Gold, Silver Import Duty Hike: India Raises Tariffs on Precious Metals to 15% To Curb Overseas Purchases and Support Rupee.

Gold Prices React on MCX Amid Volatility

Gold prices on India’s Multi Commodity Exchange (MCX) remained volatile on June 1 amid ongoing global uncertainty. At 4:02 PM, MCX gold futures were down 0.55% at ₹1,54,725 per 10 grams, while MCX silver July futures rose 0.37% to ₹2,67,980 per kg.

On the previous trading session, MCX gold June futures had closed slightly higher at ₹1,56,098 per 10 grams, while silver futures ended lower at ₹2,67,000 per kg. The mixed movement reflects shifting investor sentiment amid geopolitical tensions and changing domestic demand conditions.

Jewellery Stocks Under Pressure, Gold ETFs Gain

The rise in import duty has also impacted equity markets linked to the jewellery sector. Shares of companies including Kalyan Jewellers, Thangamayil Jewellers, and Titan Company came under pressure as higher input costs weighed on expected consumer demand.

In contrast, gold exchange-traded funds (ETFs) saw strong inflows and gains, rising between 4% and 6%. Funds such as Nippon India Gold ETF, Tata Gold ETF, HDFC Gold ETF, and ICICI Prudential Gold ETF all recorded gains in the same range. Silver ETFs also advanced by 4%–6%.

Industry observers note that the combination of higher import duties, elevated global prices, and geopolitical uncertainty has significantly reduced physical gold demand in India. While investment demand via ETFs has strengthened, jewellery consumption has slowed sharply due to higher retail prices.

Analysts say the market may remain subdued in the near term unless tax policy stabilises or global prices ease, helping restore affordability for buyers.

India’s gold demand has fallen sharply following the steep increase in import duty, which has significantly raised the overall tax burden on consumers. While global price volatility continues to influence trading sentiment, the higher domestic cost structure has emerged as the key factor dampening physical demand and slowing the jewellery market.

(The above story first appeared on LatestLY on Jun 02, 2026 11:08 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).