India's gold import duty hike from 6% to 15% has driven official imports down 23% in the second quarter of 2026, and the World Gold Council warns the policy is fueling a grey market rather than curbing demand. Seizures of smuggled gold have nearly doubled, and illegal imports could top 100 tonnes for the year.
Official gold imports into India fell 23% year-on-year in the second quarter of 2026, sliding to just 98.1 tonnes — the lowest quarterly total since Q3 2020. The World Gold Council traces the drop back to New Delhi's own policy: the country raised its gold import duty from 6% to 15% on May 13, and demand has not fallen so much as gone underground.
An 18% arbitrage gap opens
The 15% duty, combined with a 3% Goods and Services Tax, has created an 18% price arbitrage between official and unofficial channels, the World Gold Council said. Smuggled gold has traded at discounts of $150 to $200 per ounce compared with official domestic prices, tilting the math toward the grey market. Domestic gold demand itself fell 6% year-on-year to 131.4 tonnes in Q2 2026.
Seizures nearly double
Authorities seized 160.91 kg of illegally imported gold between May 13 and June 30. Seizure rates over that stretch jumped nearly 100% compared with the period before the tariff hike. The World Gold Council estimates illegal gold imports could surpass 100 tonnes for the full year of 2026, diverting revenue from government coffers to criminal networks instead of the treasury. India designed the duty increase to manage demand, narrow its trade deficit, and stabilize the rupee, but demand has moved underground rather than disappeared.
What it means for gold markets
A 23% drop in India's official purchases could introduce volatility to global gold prices, since the country's legitimate import channels are a significant source of physical demand internationally. Gold ETFs may emerge as relative winners, since they carry none of the tariff burden that physical buyers face inside India; the World Gold Council noted the funds have shown resilience even as physical demand contracted.
Investors tracking precious metals should watch two signals: whether Indian authorities reverse or reduce the tariff, and whether smuggling volumes keep accelerating. If illegal imports do reach the projected 100-tonne mark for 2026, pressure to roll back the duty increase will be hard to ignore.
Source: Crypto Briefing
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