Gold prices have surged to $4,330.46 per ounce as markets prepare for a pivotal Federal Reserve meeting led by new Fed Chair Kevin Warsh. According to latest reports, institutional investors are rapidly shifting from short to long positions in gold, anticipating significant changes in monetary policy. The macro-economic world's attention is fixed on the FOMC meeting June 16-17, marking the first time the meeting will be led by Warsh, who is known on Wall Street as an advocate for rules-based monetary policy. This represents a potential radical shift from the Fed's historically forward-guidance focused approach.
India's traditional approach to controlling gold imports through higher duties and moral appeals has proven ineffective, according to industry analysis. The government recently increased import duty on gold from 6% to 15% and urged households to avoid gold purchases for a year, but these measures have historically produced counterproductive results. As reported by Mint, India has repeatedly found that excessively high import duties lead to three predictable outcomes: higher domestic prices, increased smuggling, and migration to informal channels, a pattern observed from the 1960s to 1990 and again from 2013 to 2015.
Despite import restrictions, gold ETF inflows continue to surge, creating a circular policy contradiction. According to industry estimates, cumulative gold ETF inflows crossed ₹31,300 crore by late 2025, with holdings rising by 28.6 tonnes in a single year. When investors buy units of physically backed Gold ETFs, fund houses must eventually issue additional units by acquiring equivalent physical gold, amplifying institutional demand for imported gold. As noted by Reuters, despite India hiking tariffs on gold and silver imports to 15%, demand is unlikely to materially decline because gold buying in India is deeply cultural and financially embedded.
Gold exchange-traded funds (GTF) soared sharply on June 15th, joining the bullish bandwagon in the bullion market. The rally was driven by the peace agreement between the US and Iran that is scheduled to be signed on June 19. Majority of gold ETFs soared by 2% to 3% on Monday, with top gainers including Axis Gold ETF, HDFC Gold ETF, ICICI Prudential Gold ETF, Kotak Gold ETF, Invesco India Gold ETF, IDBI Gold ETF, Nippon India ETF Gold Bees, SBI Gold ETF, Union Bank Gold ETF and UTI Gold ETF. However, the surge comes as major mutual fund houses impose new restrictions on gold ETF transactions.
Asset management companies including SBI Mutual Fund, HDFC Mutual Fund, ICICI Prudential Mutual Fund, Nippon India Mutual Fund, Tata Mutual Fund and Axis Mutual Fund have declared new restrictions on fresh inflows in their gold ETF schemes. HDFC Bank-backed AMC has halted direct subscriptions of ₹25 crore or more into its gold ETF scheme with effect from June 8, while also announcing limitations in lump-sum buying and switch-ins at ₹10 lakh per PAN per calendar month. Nippon India Mutual Fund has banned high net-worth investors from making new subscriptions beyond ₹25 crore, capping fund-to-fund switch-ins at ₹10 lakh per month per PAN. ICICI AMC has imposed restrictions on fresh buying of more than ₹25 crore directly into their Gold ETF schemes, while Tata Group-backed AMC announced temporary restrictions on subscription transactions for its Tata Gold Exchange Traded Fund and Tata Gold ETF Fund of Fund.
India's relationship with gold remains deeply structural, with households collectively holding more than 25,000 tonnes of gold, larger than the reserves of most central banks combined. Gold serves as savings, collateral, social security, and a vehicle for intergenerational wealth transfer. According to Mint, Indian demand for gold is not disappearing but merely changing form, with gold ETFs becoming increasingly attractive as domestic prices rise due to import restrictions. This structural demand base continues to support gold's long-term bullish outlook despite policy changes and the current wave of mutual fund restrictions.
