India’s gold imports fell sharply in May after the government raised import duty on the precious metal from 6 per cent to 15 per cent in mid-May, according to a report by the World Gold Council (WGC).
Gold imports declined 39 per cent month-on-month to $3.4 billion in May, though they remained 34 per cent higher compared with the corresponding period last year. In volume terms, imports are estimated at 25-30 tonnes, significantly lower than April’s 46 tonnes and the two-year average of 59 tonnes, reflecting weaker demand following the duty hike.
The government increased the import duty on gold by nine percentage points on May 13 to conserve foreign exchange reserves, marking the steepest increase on record. Gold accounted for around 5 per cent of India’s total merchandise imports in May, down from 14 per cent during January-February, indicating moderation in demand.
The report also noted that domestic gold exchange-traded funds (ETFs) recorded their first monthly net outflow since April 2025, with outflows amounting to ₹7.25 billion ($76 million). Gross redemptions surged to a record ₹33.30 billion ($348 million).
According to the WGC, selling pressure intensified after the duty hike pushed domestic gold prices up by nearly 6 per cent, prompting investors to book profits. Consequently, more than 1.34 lakh active investor accounts were closed, marking the steepest monthly decline in folio data on record.
Despite the outflows, domestic gold holdings remained stable at 116.5 tonnes, while total assets under management stood at ₹1,846 billion ($19.3 billion). Corporate investors continued to dominate gold ETF holdings, accounting for 58 per cent of assets under management, followed by high-net-worth individuals at 31 per cent and retail investors at 11 per cent.
Several fund houses introduced temporary investment limits, capping direct subscriptions to gold ETFs at ₹25 crore and lump-sum investments in gold ETF fund-of-funds at ₹10 lakh per PAN per calendar month.
The WGC said these measures came amid broader concerns over gold imports, external balances and currency pressures. However, it noted that large investors could continue purchasing through the secondary market, ensuring liquidity through authorised participants and market makers.
By June 15, international and domestic gold prices had declined 4.2 per cent and 3.7 per cent, respectively, from their end-May levels. However, domestic gold prices were still up 13.2 per cent on a year-to-date basis, aided by the import duty hike and a 5.3 per cent depreciation in the rupee against the US dollar.
The report said concerns over inflation and expectations of tighter monetary policies by major central banks had increased the opportunity cost of holding gold, while improved investor sentiment and ETF outflows had weighed on investment demand.
Despite the outflows in May, gold ETFs witnessed a strong recovery in early June, attracting net inflows of ₹16.31 billion ($171 million) between June 1 and June 11, indicating continued investor interest in the precious metal despite regulatory changes and market volatility. (ANI)
