Gold and silver import duty hike: here is what it means for prices and ETF premiums

Subscribe to enjoy similar stories.The domestic precious metals market is adjusting to a major policy reset. The government has raised import duty on gold and silver by about 9%, including cess.

At the same time, silver imports have shifted from ‘free’ to ‘restricted’ status, while gold imports now face tighter controls.While these domestic measures were introduced to manage the national reserve, they have raised concerns about local supply, pricing transmission, and the premiums on exchange traded funds (ETFs).Despite near-term uncertainty, experts maintain a constructive long-term view. They argue that current supply constraints and pricing frictions are temporary, while global macro drivers remain supportive.Following the announcement, domestic prices did not fully reflect the 9% duty hike immediately."The day the import duty hikes were announced, the next day we saw an increase in prices of close to five to 6%, whereas duties were increased by 9%," noted Chirag Mehta, chief investment officer at Quantum Asset Management Company.Mehta said the partial transmission could be due to large inventories already priced at healthy margins, or weak consumer appetite for a sharp 9% jump.

He expects full price transmission over the coming weeks as fresh imports are required.In the short term, prices may remain range-bound.Manav Modi, assistant vice president at Motilal Oswal Financial Services, expects gold to trade steadily for a few weeks amid a temporary lull in global triggers. However, he remains bullish over a one-year horizon."From a one-year perspective, the price outlook remains positive, where the targets are about $6,000," said Manav.The bigger concern lies in ETF premiums — the extra cost investors pay over the