- India raises customs duty on gold and silver from 6% to 15% to curb imports and save forex
- Jefferies warns higher duty may boost gold smuggling and impact large jewellers most
- Investment demand in coins and bars likely to drop more than jewellery demand
India's decision to raise customs duty on gold and silver from 6% to 15% risks stoking a rise in gold smuggling, with larger jewellers bearing the brunt of the fallout, global brokerage Jefferies has warned.
The duty revision — comprising 10% basic customs duty and 5% Agriculture Infrastructure and Development Cess — is aimed at conserving foreign exchange amid elevated crude oil prices and a weakening rupee. While the government's intent is to curb gold imports, Jefferies cautioned that higher domestic prices historically tend to incentivise smuggling, and that the risk is disproportionately concentrated among larger players who operate at greater scale.
The brokerage noted there will be some near-term mark-to-market gains on inventory held under schemes such as gold on lease, which offers a partial offset. However, investment demand — particularly in coins and bars — faces a more direct hit than wedding or occasion-led jewellery purchases, where demand elasticity tends to be lower.
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Jefferies flagged that organised players led by Titan are better positioned relative to the last major duty cycle of 2012–15, given the company's domestic sourcing options and a gold exchange mix of around 50%. Even so, the brokerage warned that sector-wide share price volatility will remain elevated until there is clarity on whether further regulatory tightening is on the way.
Markets reacted swiftly. On Wednesday, MCX Gold June futures jumped 6%, or Rs 9,188, to Rs 1,62,334 per 10 grams, while MCX Silver July futures surged an identical 6%, or Rs 16,743, to Rs 2,95,805 per kg, as the duty hike compounded investor anxiety over the ongoing Middle East crisis.
Zerodha co-founder Nithin Kamath, meanwhile, flagged on X that gold and silver futures showed no unusual movement in open interest, prices, or volumes in the hours before the late-Tuesday announcement.
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