Indian Gold Demand Shifts Amidst Government Policies and Currency Volatility

The Indian government's decision to more than double customs duty on imported gold has caused prices to skyrocket, making it more expensive for consumers. This move, coupled with a weak rupee, has led to a steep discount on gold in India compared to international prices.

Historically, the monsoon season has played a significant role in determining gold demand in India. However, data suggests that government policies have had a more substantial impact than weather conditions. In 2013, India hiked duties and added new import restrictions, leading to a premium on domestic gold.

The recent customs duty hike has resulted in a significant increase in the price of gold for Indian consumers. The Indian rupee's loss against the dollar has also contributed to this rise, with international gold prices increasing by nearly 12% in rupees. When combined with the new import duty, Indian buyers are now facing a domestic price up almost 20% on the year.

Despite the higher prices, Indian households continue to buy gold, albeit at a slower pace. In fact, bar and coin demand has reached a 13-year high in the first half of 2026, with over 113 tonnes sold. Gold ETF holdings have also broken records, with more than 12 million accounts open.