Gold Demand Plummets 70% as Import Duty Increases from 6% to 15%

Indias gold demand has experienced a dramatic decrease of approximately 70% due to a significant rise in import duties imposed by the government, which has escalated from 6% to 15%. The increase in tariffs, meant to curb gold imports and improve the current account deficit, has coincided with escalating fuel and food prices. This combination has adversely affected consumer sentiment, leading to reduced spending on non-essential items, including gold.

Analysts suggest that the increased import duty may lead to a shift in consumer behavior, as buyers may explore alternative investment avenues or postpone purchases until prices stabilize. Gold is traditionally seen as a safe haven investment in India, especially during festivals and wedding seasons, which usually boost demand. However, the current economic climate has created a challenging landscape for the gold market.

Moreover, the World Gold Council had previously identified India as one of the largest consumers of gold, accounting for a significant portion of global demand. The recent downturn in demand raises concerns about its impact on the livelihoods of those involved in the gold supply chain, including miners, jewelers, and retailers, and could also affect market dynamics in the upcoming festive season, typically a peak time for gold purchases.