Gold, silver: Precious metal rout deepens ahead of Budget 2026 as import duty changes loom

Gold and silver prices have witnessed one of their sharpest corrections in decades ahead of the Union Budget 2026, as markets increasingly price in the risk of changes to import duties amid elevated global prices. On Sunday, gold and silver opened about 6% lower each on the Multi Commodity Exchange (MCX), tracking a sharp overnight sell-off in international markets, with losses later extending to nearly 9%.

The correction follows a historic rout on Friday, when silver plunged as much as 37% intraday and gold fell 12% in the spot market. Gold’s decline marked its steepest single-session fall since the early 1980s, while silver recorded the sharpest drop on record, heightening concerns over volatility ahead of key policy announcements.

In the domestic market, MCX spot prices were not updated during the initial hours of Sunday’s trading session. Gold in the MCX spot segment had already fallen by Rs 10,842 to close at Rs 1,64,389 per 10 grams of 24-carat gold on Friday, a decline of 6.2%. Silver prices stood at Rs 3,33,292 per kg, down Rs 46,691 or 12.2%. Gold and silver exchange-traded funds (ETFs) listed on Indian exchanges also mirrored the sharp correction, falling between 7% and 14%.

Import duties

Import duties play a decisive role in shaping gold and silver prices in India, as the country depends heavily on overseas supplies to meet domestic demand. Any tax imposed on imported precious metals directly raises the landed cost, which then flows through to jewellery prices and consumer demand. This impact is particularly significant in India, where gold is not just an investment but an integral part of weddings, festivals and religious traditions.

India has negligible domestic production of gold, making it highly sensitive to policy changes on imports. The scale of this dependence was evident in October 2025, when gold imports surged to a record $14.72 billion ahead of the Diwali season, according to commerce ministry data. As a result, even small tweaks in customs duty can quickly influence domestic prices of both gold and silver.

The broad rule is straightforward: higher customs duties translate into higher domestic prices, while lower duties ease prices. These decisions rest with the central government and are announced annually in the Union Budget, where the finance minister proposes revisions to import and export taxes.

Current affairs

India’s gold and silver imports surged to record levels in 2025, drawing close scrutiny from policymakers concerned about the impact of soaring precious metal prices on the trade deficit and the rupee. International gold prices have nearly doubled since early 2025, while silver has climbed even faster, pushing up India’s import bill despite subdued jewellery demand. Gold imports rose 1.6% year-on-year to $58.9 billion, while silver imports jumped 44% to $9.2 billion.

Officials and market participants told Reuters that raising customs duties is once again under active consideration ahead of the Union Budget 2026. Analysts note that India’s heavy dependence on imported precious metals—nearly a tenth of its foreign exchange outgo in 2025—leaves the economy vulnerable if global prices remain elevated in 2026.

Over the years, policy has swung between easing and tightening. Duties were sharply cut in 2021 to curb smuggling, left unchanged in 2022, raised on silver in 2023 to align it with gold, reduced again in 2024 to discourage illegal inflows, and held steady in 2025—even as reports pointed to a renewed rise in smuggling.

However, past experience suggests limited impact: even steep duty hikes in 2013 failed to materially curb demand. Demand dynamics have also evolved. Investment now accounts for over 40% of gold consumption, supported by a 283% surge in ETF inflows in 2025. Silver shows a similar pattern, combining investment demand with industrial use. With markets already pricing in the risk of higher duties, any potential revisions to import taxes have emerged as a key watchpoint for Budget 2026.