Gold prices have experienced a dramatic overnight surge of ₹13,400 following the government's decision to raise customs duties on precious metal imports from 6% to 15%. According to latest reports, silver prices have also jumped by ₹20,200 as part of the same policy shift. This latest development comes after a 3% IGST on gold imports three weeks ago, which had already pushed banks to stop imports completely for over a month. April gold imports fell to near 30-year lows as a result of the earlier duty hike, demonstrating the government's commitment to reducing import dependency. The current duty increase makes one thing clear: India is trying to reduce dollar outflows fast through targeted measures on precious metals. The policy shift comes amid a rupee hitting a record low of ₹95.63/$ and forex reserves dropping over $30 billion in weeks, with the US-Iran war choking oil supply through the Strait of Hormuz, draining India's dollar reserves rapidly.
Gold and silver ETFs experienced a sharp rally of up to 15% on Wednesday after the government raised customs duties on precious metal imports to 15%, triggering a significant surge in MCX bullion prices. According to Business Today, this policy shift has made ETFs even more attractive to investors, as they offer lower costs by avoiding charges, storage expenses, and purity risks that come with physical gold. ETFs provide high liquidity compared to SGBs and direct tracking of gold prices through stock exchanges. The tax structure includes long-term capital gains taxed at 12.5% after 12 months, while short-term gains are taxed as per income slab. Market expert Ajay Kedia confirms that ETFs offer no storage or theft risk and provide transparency through market-linked NAVs and prices, reducing the opacity often seen in physical gold transactions. Recent market data shows Gold ETF 6% Up as investors continue to add to their portfolios as part of hedging strategies, with analysts suggesting 5% to 10% allocation to Gold ETF can help diversify risk during market nervousness due to geopolitical tensions, war fears, and inflation worries.
According to market expert Ajay Kedia, Reserve Bank of India-issued Sovereign Gold Bonds (SGBs) currently offer the best long-term value among gold investment options. SGBs provide a dual advantage - investors receive 2.5% annual interest along with gains linked to gold prices. The most significant benefit is that capital gains become completely tax-free if the bonds are held until maturity of eight years. As reported by Kedia, SGBs are ideal for investors who want maximum post-tax returns and can stay invested for the long term, though they come with a long lock-in period and limited liquidity in secondary markets. The bonds offer complete tax exemption on capital gains, making them particularly attractive for long-term wealth creation strategies. With the current policy environment, SGBs may become even more appealing as they provide stable returns without exposure to import duty volatility.
Physical gold remains the most common form of gold investment in India, especially for jewellery purchases during weddings and festivals. However, as reported by Kedia, physical gold comes with additional costs that reduce overall returns, including 3% GST, making charges on jewellery, storage and locker expenses, and purity concerns in some cases. The tax treatment for physical gold includes long-term capital gains after 24 months with LTCG taxed at 12.5% without indexation, while short-term gains are taxed as per slab. Kedia emphasized that physical gold is more suitable for cultural or jewellery needs rather than pure investment purposes, with recent market activity showing investors buying 1000 Kalyan jewellers today at ₹345 for cultural purposes. The PM's recent appeal to avoid gold purchases for a year adds another layer of uncertainty for physical gold dealers who are already facing margin pressure from duty hikes.
Digital gold platforms have become increasingly popular due to ease of investment, allowing investors to buy gold online with very small amounts through apps and fintech platforms without requiring a demat account. According to Kedia, digital gold offers easy online investment and small-ticket investments possible. However, he cautioned that digital gold still lacks strong regulatory oversight from the Securities and Exchange Board of India or RBI. The platform faces higher spreads that may reduce returns and offers limited tax advantages compared to other gold investment options. The India Bullion and Jewellers Association (IBJA) has started work towards a self-regulatory organisation (SRO) framework for the sector, but regulation remains limited. The recent import duty hike is encouraging younger investors to explore digital gold investments, with many analysts believing digital gold investments may grow rapidly throughout 2026.
