Gold Prices Surge Amid Duty Hike, Profit Booking Observed
Profit booking ramps paper gold rally post duty hike
Mint
Image: Mint
Following a 9% increase in gold import duty by the Indian government, gold exchange-traded funds (ETFs) saw a rise of approximately 6%. Despite this hike, analysts noted significant profit booking, leading to a limited price rally as market participants reacted to geopolitical tensions and inflation concerns.
- 01Gold import duty increased by 9%, raising it back to 15%.
- 02Gold ETFs closed around 6% higher, with major funds like Nippon India's GoldBees gaining 5.7%.
- 03Profit booking limited price increases despite the duty hike.
- 04India's current account deficit is pressured by gold imports, which amount to about 700 tonnes annually.
- 05Demand for gold may decrease by 5-10% due to the duty hike, according to industry experts.
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The Indian government has raised the gold import duty by 9%, now totaling 15%, in an effort to manage foreign exchange reserves amid rising oil prices linked to ongoing geopolitical tensions in West Asia. This move has led to a notable rally in gold exchange-traded funds (ETFs), which closed approximately 6% higher, with Nippon India's GoldBees ETF rising 5.7% to ₹131.74 per unit. However, analysts observed significant profit booking, indicating that the actual price increase was limited. Gold futures on the Multi Commodity Exchange of India (MCX) also reflected this trend, trading up 5.9% at ₹1.62 lakh per 10 grams. The duty hike aims to address India's current account deficit, which is exacerbated by annual gold imports of about 700 tonnes. Experts predict that the demand for gold may drop by 5-10% due to the increased costs, while gold remains a popular hedge against inflation and geopolitical instability. In FY26, gold imports accounted for $71.98 billion, making it India's second-largest import after crude oil.
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The increase in gold import duty may lead to higher prices for consumers and a potential drop in demand for gold, affecting buyers and investors in the market.
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