India’s Gold Discounts Surge to Record Levels as Import Duty Hike Triggers Demand Collapse

In India, dealers reported gold discounts widening to as much as $207 per ounce over official domestic benchmark prices. This figure includes the 15% import duty and an additional 3% sales levies embedded in the effective pricing structure. The latest levels mark a sharp deterioration from the previous week, when discounts were limited to around $15 per ounce, while premiums had earlier reached up to $6.

The surge in discounts followed a recent policy move in which India raised import tariffs on gold and silver from 6% to 15%. Authorities also tightened regulations on duty-free gold imports used for jewellery exports, restricting such imports to 100 kilograms per licence. The policy shift led to a rapid decline in purchasing activity across the domestic market.

Domestic gold prices in India traded near 160,500 rupees per 10 grams on Friday, after touching 164,497 rupees earlier in the week, the highest level in more than two months. A Mumbai-based bullion dealer noted that discounts had expanded sharply because demand had “virtually disappeared” while scrap supply had increased significantly, reflecting a sudden imbalance in market flows following the policy changes.

The weakening of demand has been particularly evident among jewellers and retail buyers, many of whom have largely stepped back from purchases as elevated prices discouraged fresh demand. Investor sentiment has also shifted toward selling existing holdings, further intensifying downward pressure on market premiums.

In contrast, China has continued to demonstrate resilient bullion demand, helping stabilize regional price premiums. Analysts at ANZ stated that stronger Chinese demand is expected to partially offset India’s weakness following the tariff increase, supporting broader market equilibrium.

In China, bullion traded at premiums ranging between $15 and $20 per ounce over global benchmark prices, remaining broadly stable compared to the previous week’s $14 to $20 range. Bernard Sin, Regional Director for Greater China at MKS PAMP, attributed the stability to sustained investment demand and robust industrial buying activity. He noted that import restrictions remain a key constraint, although market expectations suggest potential easing in the near term. He also highlighted aggressive stockpiling by solar and electronics manufacturers, driven further by the removal of value added tax export rebates.

The continued strength of Chinese industrial demand has provided underlying support for premiums even as global bullion prices face pressure.

On the global front, spot gold prices declined by 2.8% over the week. The drop was influenced by rising energy prices, which intensified inflation concerns and reinforced expectations that interest rates may remain elevated for a longer period. Market sentiment was additionally shaped by gains in United States equities, with both the Dow Jones Industrial Average and the Standard and Poor’s 500 Index advancing by approximately three quarters of a percent on Thursday.

Across other Asian trading hubs, pricing remained comparatively stable. In Hong Kong, gold traded between parity and premiums of up to $2 per ounce. In Japan, bullion was sold at a discount of $0.50 per ounce, while Singapore recorded premiums ranging from $1 to $3.30 per ounce.

The divergence in regional gold pricing highlights a rapidly shifting global bullion landscape, where policy-driven demand shocks in India are being counterbalanced by resilient industrial and investment demand in China, reshaping trade flows and market sentiment across Asia.