Gold is back in focus in India after the government sharply increased import duties on gold and silver to 15%. This triggered a sharp rally in domestic prices and pushed many investors to reconsider how they buy the yellow metal.
With physical gold becoming significantly more expensive, market experts say gold exchange-traded funds (ETFs) are increasingly emerging as a preferred option for retail investors.
How much have gold prices risen?
Gold rates on the Multi Commodity Exchange (MCX) surged sharply and were trading around Rs 1.62 lakh per 10 grams. The revised duty structure now includes a 10% Basic Customs Duty and a 5% Agriculture Infrastructure and Development Cess (AIDC), significantly increasing the landed cost of imported gold.
Experts estimate that the 9-percentage-point increase could structurally add around Rs 12,000–14,000 per 10 grams to local gold prices over time.
Why ETFs are gaining over physical gold
Unlike physical gold, ETFs do not involve making charges, storage concerns, or direct exposure to higher import-related retail premiums.
Dr Renisha Chainani, Head of Research at Augmont, said the duty hike has made ETFs structurally more attractive. “Physical gold is now 15% costlier at import, while ETFs carry zero import duty burden — making them structurally superior for new-money allocation,” she said.
According to Chainani, commodity ETF turnover in FY26 has already surged sharply and now exceeds equity ETF turnover. SIP-style investing through gold ETFs may become increasingly popular among retail investors.
What’s driving the gold rally?
The biggest trigger is the customs duty hike itself. India imports most of its gold, so any increase in import taxes directly raises domestic prices.
A weakening rupee is adding to the pressure. The rupee recently hit record lows against the US dollar, making imported gold even more expensive. Geopolitical tensions linked to the ongoing West Asia crisis continue to support safe-haven demand globally.
Prime Minister Narendra Modi’s recent appeal asking citizens to avoid discretionary gold purchases for a year has further intensified discussion around gold’s role in India’s import bill.
What should investors do?
Dr Ravi Singh, Chief Research Officer at Master Capital Services Limited, said crucial support levels have shifted higher to 159,000 and 156,000, while overhead resistance is at 165,000. “As long as prices sustain above these reinforced floors, the upward momentum is expected to persist,” he said.
However, experts caution against aggressively chasing the rally. Staggered allocation through SIP-based ETF investing may be a more balanced strategy for long-term investors.
The broader outlook for gold now depends on crude oil prices, the rupee’s trajectory, geopolitical developments, and whether global central banks cut interest rates later this year. One thing is clear: the duty hike has changed gold investing in India, and retail investors are rapidly reassessing their options.
