Gold loses shine: Imports fall 39 per cent after duty hike, ETFs record rare outflows

India’s gold imports witnessed a sharp decline in May after the government announced a steep hike in import duty on the precious metal, according to the latest report by the World Gold Council (WGC).

Gold imports fell 39 per cent month-on-month to $3.4 billion in May after the government increased the import duty on gold from 6 per cent to 15 per cent in mid-May. However, imports remained 34 per cent higher compared to the same period last year.

According to WGC estimates, India’s gold import volumes moderated to around 25–30 tonnes in May, significantly lower than 46 tonnes in April and the two-year average of nearly 59 tonnes, reflecting the impact of the new duty structure.

The government’s decision to raise gold import duty by 9 percentage points marked one of the steepest hikes on record and was aimed at reducing pressure on foreign exchange reserves and managing external balances.

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Gold’s share in India’s total merchandise imports also dropped sharply to around 5 per cent in May, compared with nearly 14 per cent during January-February, highlighting the slowdown in demand.

Meanwhile, India’s gold exchange-traded funds (ETFs) also witnessed pressure, recording their first monthly outflows in more than a year. The trend comes as investors reacted to changing market dynamics, regulatory measures and volatility in gold prices.

Data from the Association of Mutual Funds in India (AMFI) showed that as of March 2026, corporates dominated gold ETF holdings with 58 per cent of assets under management (AUM), followed by high-net-worth individuals at 31 per cent and retail investors at 11 per cent.

Several fund houses have also introduced temporary restrictions, including a ₹25 crore cap on direct gold ETF subscriptions and a ₹10 lakh monthly limit per PAN per calendar month for lump-sum investments in gold ETF fund-of-funds.

The WGC noted that these steps come amid concerns over rising gold imports, external balances, currency pressures and efforts to manage India’s trade position.

Gold prices also witnessed some cooling in June. By June 15, international gold prices declined 4.2 per cent, while domestic gold prices dropped 3.7 per cent from their May-end levels.

Despite the correction, domestic gold prices remained up nearly 13.2 per cent in 2026, supported by the higher import duty and rupee depreciation against the US dollar.