India's Gold Discounts Soar as Duty Hike Spurs Investor Sell-Off

India's gold discounts reached a record $200/ounce due to a sharp price surge following an import duty hike. Increased tariffs aimed at curbing foreign purchases led to investor sell-offs in a weak market. Concerns emerged over possible smuggling due to widened margins in the grey market.

Gold discounts in India hit a record high of over $200 an ounce this Wednesday, following an unprecedented surge in prices spurred by an increase in import duty. The move led to investor selling amid already low demand, according to local bullion dealers speaking to Reuters.

India's government raised tariffs on gold and silver imports to 15% from 6%, aiming to reduce pressure on the nation's foreign exchange reserves. The duty hike prompted a sharp increase in local gold prices, causing some investors to sell their holdings at steep discounts.

Dealers warn that the latest duty hike could encourage gold smuggling, with grey-market margins now at 18%, up from 9%. Retail buyers and jewelers largely sat out the market activity, exacerbating selling pressures and driving discounts to unprecedented levels.