India Gold Discounts Widen as Buyers Await Import Duty Clarity

India's gold market sees discounts widen sharply as buyers await clarity on a possible import-duty cut. Uncertainty prompts traders to delay purchases, while domestic prices diverge from rising global bullion rates.

India's physical gold market is witnessing a sharp widening in discounts as buyers remain cautious amid uncertainty over a possible reduction in import duties on gold and silver. The development creates a divergence between domestic and international bullion prices, with traders adopting a wait-and-watch approach before making fresh purchases.

Gold and silver prices in India decline on August 27 even as global bullion markets move higher. On the Multi Commodity Exchange (MCX), gold futures fall around 0.8% to nearly ₹1.58 lakh per 10 grams, while silver futures decline about 0.2% to around ₹2.38 lakh per kg. In contrast, international spot gold rises 0.8% to approximately $4,630 an ounce, highlighting the growing gap between domestic and global markets.

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The market reaction follows reports that the central government is considering a possible reduction in import duties on precious metals. Industry representatives and bullion traders are reportedly seeking a reduction from the current 15% duty, with a cut to around 6% being discussed. However, no final decision has been taken, leaving market participants uncertain about the direction of domestic prices.

This policy uncertainty is directly affecting physical gold demand. Domestic gold had already been trading at a discount of approximately 2-2.5% to the landed or import-parity price earlier in the week. The discount subsequently widens by another 1-1.5 percentage points, indicating increased pressure on dealers to lower prices to attract buyers.

The primary concern for buyers is the possibility of an immediate decline in landed gold prices if the government reduces the import duty. Consumers and traders therefore prefer to postpone purchases rather than build inventory at existing price levels. Dealers holding stocks imported under the higher duty could also face pressure to reduce prices if a duty cut is announced.

According to Bhavik Patel, senior commodity analyst at Tradebulls Securities, the widening discount reflects typical wait-and-see behaviour ahead of a potential policy change. He notes that a duty reduction could lower the landed cost of gold immediately, potentially forcing dealers with higher-cost inventories to offer additional discounts.

The current uncertainty follows the government's decision to increase the gold import duty to 15% on May 13, 2026. The measure is intended to curb gold imports and help conserve foreign exchange reserves. The higher duty has already affected domestic demand and imports, with official data indicating that monthly gold imports have fallen substantially from earlier levels.

The World Gold Council has also estimated that India's gold demand could decline by around 50-60 tonnes in 2026, or approximately 10% from the previous year, partly because of the higher import duty. Investment demand is considered particularly sensitive to changes in duties and domestic prices.

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Market participants now await greater clarity from the government. If a duty reduction is announced, domestic gold prices could undergo rapid repricing as the lower import cost is reflected in the market. Conversely, if no reduction materialises, discounts could gradually narrow as buyers return and uncertainty eases.

The immediate outlook for India's physical gold market therefore remains closely linked to government policy. Until there is greater clarity on the proposed import-duty changes, buyers and dealers are likely to remain cautious, keeping domestic gold prices under pressure despite strength in international bullion markets.