Gold imports tumble 39% in May after duty hike; ETFs see first outflows in over a year: WGC
New Delhi, June 19
Gold imports into India fell sharply in May after the government raised import duty on the precious metal from six per cent to 15 per cent in mid-May, according to a World Gold Council report.
Gold imports declined 39 per cent month-on-month to USD 3.4 billion in May, although they were still 34 per cent higher compared to the same period last year.
The government increased the import duty on gold by 9 percentage points on May 13 to save forex, marking the steepest hike on record, along with broader regulatory measures.
"In volume terms, we estimate imports to be in the range of 25-30t, notably lower than April's 46t and the two-year average of 59t, reflecting a moderation in import volume as the higher duty structure took effect," the WGC report said.
Gold accounted for around 5 per cent of total merchandise imports in May, down from 14 per cent recorded during January-February, indicating a moderation in demand.
The report also noted that domestic gold exchange-traded funds (ETFs) witnessed their first monthly net outflow since April 2025, with outflows amounting to Rs 7.25 billion (USD 76 million). Gross redemptions rose to a record Rs 33.30 billion (USD 348 million).
According to the report, selling pressure intensified after the duty hike in mid-May. The increase pushed domestic gold prices up by nearly 6 per cent, encouraging investors to book profits. As a result, 134,343 active investor accounts were closed, marking the steepest monthly decline in folio data on record.
Despite the outflows, domestic gold holdings remained stable at 116.5 tonnes, while total assets under management (AUM) stood at Rs 1,846 billion (USD 19.3 billion).
The report said institutional and wealthy investors continued to dominate gold ETF investments. Data from the Association of Mutual Funds in India (AMFI) showed that as of March 2026, corporates held 58 per cent of gold ETF AUM, followed by high-net-worth individuals at 31 per cent and retail investors at 11 per cent.
Several fund houses also introduced temporary investment limits. Direct subscriptions to gold ETFs have been capped at Rs 25 crore, while lump-sum investments in gold ETF fund-of-funds have been restricted to Rs 10 lakh per PAN per calendar month.
The WGC report said that while fund houses cited prevailing market and economic conditions, "these measures come amid broader concerns around gold imports, external balances, currency pressures, and the Prime Minister's appeal to consumers to curtail their gold buying."
"Given that large investors account for a sizeable proportion of AUM, the cap on investment could limit inflows into fund houses to some extent, although they can continue to buy from the secondary market where authorised participants and market makers continue to operate and provide liquidity," the report added.
Meanwhile, the gold market saw some moderation in returns. By June 15, international and domestic gold prices had fallen 4.2 per cent and 3.7 per cent, respectively, from their end-May levels.
However, on a year-to-date basis, domestic gold prices rose around 13.2 per cent, while international prices remained largely flat. The report attributed the difference to the 9 per cent import duty hike and a 5.3 per cent depreciation of the Indian rupee against the US dollar.
The report observed that elevated inflation concerns have led to expectations that "major central banks will tighten their monetary policy; this has raised the opportunity cost of holding gold and pressured its recent performance."
It further noted that improved investor risk sentiment and ETF outflows have "weighed on investment demand too, contributing to the recent softening in prices."
Despite the May outflows, gold ETFs recorded a strong recovery in early June, attracting net inflows of Rs 16.31 billion (USD 171 million) between June 1 and June 11, reflecting continued investor interest in the precious metal despite regulatory changes and market volatility.
— ANI
Reader Comments
As a small retail investor, this hurts. I was planning to buy some gold for my daughter's wedding next year, but now with 15% duty, it's become too expensive. Tradition vs economics - Modi ji needs to understand that gold is not just an investment, it's our culture. 😞
The WGC report confirms what many of us suspected - institutional investors dominate gold ETFs. 58% held by corporates? No wonder the little guy gets squeezed when duty hikes happen. Good to see ETF outflows for once, maybe this will cool the irrational gold rush.
Interesting to see Indian gold ETF outflows while global markets are also softening. The 39% import drop is massive - shows the duty hike worked faster than expected. But will this lead to more smuggling? That's always the risk with such heavy-handed measures.
I think this is good for the economy in the long run. Gold is a dead investment - it doesn't generate jobs or produce anything. Better to put money in stocks or mutual funds that actually support businesses. But tell that to Indian aunties and uncles who think gold is the only safe haven! 😂
134,000 investor accounts closed in a month! That's a significant signal of panic selling after the duty hike. But interesting that gold prices have already fallen 3.7% since end-May - seems like the market is adjusting. The early June inflow recovery of Rs 16 billion shows there's still strong appetite.
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