Indian Gold Imports Plunge to 30-Year Low as Banks Halt Purchases Over Unexpected Tax

Key facts

• Indian gold imports expected to drop to about 15 tonnes in April, a 30-year low.
• Banks, which import most of India's refined gold, have completely stopped shipments.
• Indian customs began demanding a 3% integrated goods and services tax (IGST) on gold.
• Surendra Mehta, secretary of the Indian Bullion and Jewellers Association, confirmed the halt.
• Gold prices traded near session highs after disappointing ISM manufacturing data.
• Bank of America maintains a 12-month gold price target of $6,000 per ounce.
• Gold and silver rose strongly on Thursday as the US Dollar Index fell.
• Rising oil prices fuel inflation fears, pressuring gold in the near term.

Imports Grind to a Halt

India’s gold imports are on track to plunge to roughly 15 tonnes in April, a level not seen in nearly three decades, as domestic banks have halted all purchases following an unexpected tax demand from customs authorities. The development threatens to disrupt supply chains in the world’s second-largest gold consumer. Industry and government sources said Friday that banks, which handle the majority of refined gold imports, stopped shipments entirely after customs began demanding a 3% integrated goods and services tax on the metal. The sudden levy caught the trade off guard, freezing a market that typically imports 60 to 80 tonnes per month.

Tax Shock Paralyzes Banking Channels

The 3% IGST demand, applied at the point of import, has effectively made it uneconomical for banks to continue purchasing gold, according to trade officials. Surendra Mehta, secretary of the Indian Bullion and Jewellers Association, confirmed that banks have completely suspended shipments since the new requirement took effect. India imports nearly all of its gold, and banks are the primary conduit for bringing refined metal into the country. The halt has created a vacuum that could push premiums higher and force jewellers to rely on recycled gold or informal sources. The government has not yet clarified whether the tax is a temporary measure or a permanent policy shift.

Global Gold Market Reacts

Despite the Indian disruption, international gold prices showed resilience, trading near session highs after disappointing US ISM manufacturing data weakened the dollar. On Thursday, gold and silver rallied strongly as the US Dollar Index declined, prompting bargain buying after recent losses. Analysts noted that the metal’s safe-haven appeal remains intact, but near-term headwinds persist. Rising oil prices are stoking inflation fears, leading markets to price in fewer interest rate cuts this year, which typically weighs on gold. Bank of America, however, stands by its 12-month price target of $6,000 per ounce, expecting average prices of $86 in 2026.

Historical Context and Stakes

India’s April import figure of 15 tonnes would be the lowest since the early 1990s, underscoring the severity of the tax-driven freeze. The country imported an average of 70 tonnes per month in 2025, making this a dramatic contraction. The disruption comes at a time when global central banks are increasing gold reserves, and Indian consumers typically ramp up purchases ahead of the wedding season. If the tax standoff persists, India’s gold demand could slump further, potentially affecting global prices and refining margins.

Outlook and Uncertainty

The immediate question is whether the Indian government will clarify or rescind the IGST demand. Trade bodies are expected to lobby for a rollback, warning that prolonged disruption could damage the formal gold trade and boost smuggling. Globally, gold remains caught between inflationary pressures from oil and a weakening dollar. Bank of America’s bullish long-term forecast suggests that once the tax issue is resolved, Indian demand could rebound sharply. For now, the market watches New Delhi for a decision that will determine the fate of 15 tonnes—and perhaps much more.

The bottom line

• Indian gold imports fell to about 15 tonnes in April, a 30-year low, after banks halted purchases due to a new 3% IGST demand by customs.
• Banks, which import most of India's refined gold, have completely stopped shipments since the tax was applied.
• Surendra Mehta of the Indian Bullion and Jewellers Association confirmed the import freeze.
• Global gold prices rose near session highs after weak US ISM data and a falling dollar, but face headwinds from oil-driven inflation fears.
• Bank of America maintains a $6,000/oz 12-month gold target, expecting average prices of $86 in 2026.
• The Indian government's next move on the IGST will determine whether the import collapse is temporary or prolonged.