India's higher gold import duty could cut demand by up to 60 tonnes in 2026: WGC

India's decision to raise the effective import duty on gold from 6% to 15% is expected to weigh on domestic demand this year, with the World Gold Council (WGC) estimating that the move could reduce the country's jewellery, bar and coin consumption by 50-60 tonnes, or roughly 10% year-on-year, according to its Gold Mid-Year Outlook 2026.

The report identifies India as one of the key variables that could influence the global gold market in the second half of 2026. As the world's second-largest gold consumer after China, changes in Indian buying patterns have a significant bearing on global demand, particularly during festive and wedding seasons when jewellery purchases typically surge.

Higher import duty likely to dent gold demand

According to the WGC, the higher import duty is likely to make gold more expensive for consumers, potentially discouraging purchases of jewellery as well as investment products such as bars and coins. While some demand could shift to recycled gold, the increase in taxes is expected to reduce overall consumption in the official market.

The council, however, believes that the duty hike alone is unlikely to alter the long-term outlook for gold. Structural drivers supporting the precious metal—including sustained central bank purchases, geopolitical uncertainty and investment demand—remain firmly in place and should continue to underpin prices even if physical demand from India softens.

On May 13, the Centre raised the customs duty on gold from 6% to 15%, shortly after Prime Minister Narendra Modi urged people to avoid buying gold for a year.

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Gold outlook remains stable despite near-term risks

The WGC expects gold prices to remain broadly stable during the second half of 2026 under its base-case scenario. Assuming current macroeconomic conditions remain largely unchanged, bullion prices are likely to trade within plus or minus 5% of prevailing levels.

The outlook, however, could change rapidly if global risks intensify. The report says renewed geopolitical conflicts, a sharper-than-expected slowdown in the global economy or a faster pace of monetary easing by major central banks could drive gold prices back towards US$4,500 per ounce, while an even more optimistic scenario could see prices approach US$5,000 per ounce.

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On the other hand, stronger global economic growth, higher real interest rates and improving investor appetite for riskier assets could put pressure on bullion. Even in such a scenario, the WGC believes declines beyond 10-15% are likely to attract bargain buying, limiting any sustained downside.

Growing influence of Asia

Another notable trend highlighted in the report is the growing influence of Asia on global gold trading. The WGC notes that most of the price recovery witnessed during the first half of the year occurred during Asian trading hours, signalling that price discovery is increasingly shifting away from traditional Western markets.

Central banks are also expected to remain an important pillar of demand. The report estimates that an additional 20-30 tonnes of official-sector purchases could lift gold prices by around 1%, reinforcing the metal's role as a reserve asset amid ongoing geopolitical and macroeconomic uncertainty.

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Gold prices from the peak

Gold prices have corrected sharply after hitting a record Rs 1.8 lakh per 10 grams ($5,600) in January, falling to around Rs 1.4 lakh ($3,960) by the end of June. Market sentiment remains weak, with consumers and investors selling amid fears of further declines. Analysts say a sustained break below $4,000 could drag prices towards $3,600 (Rs 1.3 lakh), although oversold conditions may trigger a short-term rebound towards $4,100-$4,165 (Rs 1.45-1.47 lakh).

India's gold consumption

For India, the higher import duty presents a mixed picture. While the measure could help moderate imports and reduce pressure on the country's current account, it is likely to dampen consumer demand in the near term. Even so, the WGC expects India's deep-rooted affinity for gold, supported by cultural traditions, festivals, weddings and long-term investment preferences, to continue underpinning demand over the longer term. As a result, despite the projected decline in consumption this year, India is expected to remain one of the world's most influential gold markets and a key driver of global bullion demand.

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