Global precious metal prices also remained firm amid sticky US inflation and geopolitical tensions in the West Asia.
Silver prices on the Multi Commodity Exchange (MCX) jumped to their 6% upper circuit limit of ₹2.95 lakh per kg. Gold prices also touched the 6% upper circuit at ₹1.62 lakh per 10 grams.
In the international market, spot silver rose 1% to $87.40 per ounce, while spot gold traded near $4,713.39 per ounce.
US gold futures for June delivery climbed 0.7% to $4,721.80 per ounce.
The rally came after the government increased the effective import duty on gold and silver to 15% from 6%, aiming to curb imports and reduce pressure on India’s foreign exchange reserves.
Under the revised structure, the government imposed a 10% basic customs duty along with a 5% Agriculture Infrastructure and Development Cess (AIDC) on imports of the two precious metals.
The move is expected to cool demand in India, the world’s second-largest consumer of gold, while helping narrow the trade deficit and support the rupee.
“As expected, the government has raised duties to curb the current account deficit. However, this could affect demand, as gold and silver prices were already elevated,” Surendra Mehta, national secretary at the India Bullion and Jewellers Association, said.
Prime Minister Narendra Modi had earlier urged citizens to avoid gold purchases for a year to help conserve foreign exchange reserves. India imports nearly all of the gold it consumes.
Analysts said investment demand for gold has strengthened in recent months as rising bullion prices and weak equity market returns pushed investors toward safe-haven assets.
Inflows into India’s gold exchange-traded funds surged 186% year-on-year to a record 20 metric tonnes in the March quarter, according to the World Gold Council.
India had already started tightening rules around bullion imports in recent weeks by levying a 3% integrated goods and services tax (IGST) on gold and silver imports, prompting banks to temporarily pause shipments for more than a month.
As a result, April gold imports dropped to a near 30-year low. Market participants now expect imports to decline further following the latest duty hike.
Bullion dealers also warned that higher import taxes could revive gold smuggling, which had eased after tariff cuts in mid-2024.
–With agencies inputs
