Gold, Silver ETFs Surge Up To 6% After Govt Raises Import Duty

Gold and silver exchange traded funds (ETFs) surged up to 6% on Wednesday after the government raised import duties on gold and silver to 15% from 6% in an effort to reduce precious metal imports and ease pressure on India's foreign exchange reserves.

The move came days after Prime Minister Narendra Modi urged citizens to avoid gold purchases and reduce non-essential foreign exchange spending amid rising economic stress linked to the ongoing Middle East conflict.

The higher duties are expected to curb bullion imports, support the rupee and help narrow India's trade deficit at a time of elevated crude oil prices and external sector pressure.

Domestic bullion prices rallied sharply following the tariff hike. Gold futures jumped 7.2% to ₹1,64,497 per 10 grams, while silver futures surged 8% to ₹3,01,429 per kg.

Gold, Silver ETFs Rally

The sharp rise in bullion prices triggered strong gains in precious metal ETFs, as higher domestic prices improve fund asset values and could encourage investors to shift from physical gold purchases towards financial products such as ETFs.

Units of Nippon India Gold ETF, Tata Gold ETF, HDFC Gold ETF and ICICI Prudential Gold ETF climbed between 4% and 6%.

Silver-focused ETFs also witnessed strong buying interest. Tata Silver ETF, Nippon India Silver ETF and HDFC Silver ETF advanced 4%-6%.

Analysts said costlier imports could increase investor preference for exchange-traded bullion products over physical purchases.

Shares of gold financing companies also rallied sharply as rising domestic gold prices increase the value of jewellery pledged as collateral.

Manappuram Finance, Muthoot Finance and IIFL Finance rose up to 8%.

Market experts noted that gold loan NBFCs expand their loan books primarily on value rather than physical volume. As domestic gold prices rise, the overall value of pledged collateral automatically increases, supporting growth in assets under management (AUM).

Jewellery Stocks Under Pressure

In contrast, jewellery stocks continued to remain under pressure as investors worried that higher duties and the government's appeal to avoid gold buying could weaken consumer demand.

Shares of Titan Company, Kalyan Jewellers and Thangamayil Jewellery fell between 1.5% and 6%.

The sector has been witnessing volatility after the government intensified efforts to curb gold imports amid rising concerns over India’s external balances and rupee weakness.

Meanwhile, broader equity markets rebounded sharply after recent weakness.

The BSE Sensex surged over 600 points to trade around 75,102, while the Nifty 50 gained more than 180 points to reclaim the 23,560 level.