Informal Gold Market Soars in India Amid Higher Import Duties

India's informal gold market has seen an increase in recent months due to higher import duties on gold and silver. The government more than doubled import duties from 6% to 15%, aiming to reduce India's demand for gold, which is the country's largest imported commodity after oil.

Retail buyers can negotiate discounts of up to Rs 10,000 for every 10 grams, depending on their relationship with the jeweler. A middle-aged woman was quoted as saying, 'It was an offer I couldn't refuse. Gold prices are way too high and we trust the jeweler.'

Dealers who take cash can avoid certain taxes and share some of those savings with buyers. The revival of this informal market is an unintended outcome of a policy intended to reduce India's demand for gold.

The market has expanded since the duty increase, particularly during the wedding and festival season, which begins in mid-October and continues through early March. Traders have managed to obtain gold at discounts of up to $200 an ounce compared with prevailing domestic prices.