Gold prices surged by Rs 8,550 per 10 grams, while silver climbed by Rs 20,500 per kilogram in the domestic markets on Wednesday, following the government's announcement of an increase in import duties on precious metals. The duty hike comes as part of Prime Minister Narendra Modi's push for austerity measures and curbs on gold purchases to reduce unnecessary foreign-exchange outflows.
Impact of Import Duty Hike
The government raised the import duty on gold and silver by 5 percentage points, effective immediately. This move aims to discourage imports of the yellow metal, which is a major contributor to the current account deficit. Analysts expect the higher duties to dampen demand in the short term, especially ahead of the wedding season.
Market Reaction
Following the announcement, gold futures on the Multi Commodity Exchange (MCX) hit a fresh high of Rs 72,450 per 10 grams, while silver futures touched Rs 88,200 per kg. Spot gold in the international market also edged higher, trading near $2,050 per ounce.
Jewelers across the country reported a rush of customers looking to buy gold before prices rise further. However, some traders expressed concern that the duty hike could lead to a slowdown in retail demand.
The government's decision aligns with its broader strategy to curb non-essential imports and stabilize the rupee. In recent months, India's gold imports have surged, putting pressure on the trade deficit.
