India's recent decision to significantly increase its gold import duty is set to cause a notable drop in the country's gold demand. The World Gold Council (WGC) estimates this policy change could reduce India's gold consumption by 50 to 60 tonnes by 2026, representing approximately a 10% year-on-year decline, as detailed in its Gold Mid-Year Outlook 2026.
Impact of the Increased Import Duty
Effective May 13, the Indian government raised the customs duty on gold from 6% to 15%. This move is primarily intended to moderate imports and alleviate pressure on the nation's current account. However, the WGC's report highlights the immediate consequence: higher prices for domestic consumers.
Such an increase in cost is expected to deter purchases of gold jewellery, bars, and coins, which are traditional forms of investment and adornment in India. While some demand might shift towards recycled gold, the overall consumption in the official market is projected to decrease. This adjustment comes shortly after Prime Minister Narendra Modi urged citizens to consider avoiding gold purchases for a year.
India's Influence on the Global Gold Market
As the world's second-largest gold consumer after China, any shift in Indian buying patterns has substantial implications for global demand. This is particularly true during India's numerous festive and wedding seasons, which traditionally see a surge in gold jewellery acquisitions. The WGC identifies India as a critical variable influencing the global gold market, especially in the latter half of 2026.
Long-Term Outlook and Price Stability
Despite the near-term dampening effect on Indian demand, the WGC believes that the duty hike alone is unlikely to alter the long-term fundamentals supporting gold. Structural drivers such as sustained central bank purchases, ongoing geopolitical uncertainty, and persistent investment demand are expected to continue underpinning gold prices.
The council anticipates gold prices to remain broadly stable during the second half of 2026 under a base-case scenario, trading within a +/- 5% range of current levels. However, intensifying global risks, such as renewed conflicts or a sharper global economic slowdown, could push prices significantly higher, potentially towards US$4,500 or even US$5,000 per ounce.
Recent Price Trends and Asia's Growing Role
Gold prices have corrected after reaching record highs earlier this year, experiencing one of their sharpest quarterly declines in over a decade. Prices fell from approximately Rs 1.8 lakh (around $5,600) per 10 grams in January to about Rs 1.4 lakh (around $3,960) by the end of June. Market sentiment remains cautious, with some investors selling amid fears of further declines.
The WGC report also notes the increasing influence of Asia on global gold trading. Most of the price recovery in the first half of the year occurred during Asian trading hours, signaling a shift in price discovery away from traditional Western markets.
Enduring Affinity for Gold
Even with the projected short-term decline in consumption due to the India gold import duty, India's deep-rooted cultural affinity for gold, driven by traditions, festivals, weddings, and long-term investment preferences, is expected to continue supporting demand over the longer term. India is projected to remain one of the most influential gold markets globally and a key driver of international bullion demand.