The difference between gold prices in India and international markets has widened sharply since the start of 2026. The gap is now nearly 18%. Two factors are primarily responsible: a steep hike in import duty and a weakening Indian rupee against the US dollar.
The Numbers Tell the Story
MCX spot gold has gained Rs 23,615 per ten grams (24 carat) so far in 2026, rising from Rs 1,32,614 on January 1 to Rs 1,56,229 by May 27, 2026. In comparison, gold in dollar terms has barely moved — a modest rise from $4,319 to $4,388, just 1.6% during the same period.
“The near 18% YTD jump domestically versus minimal international movement is a direct consequence of the May 13th policy action of duty increase by 9% and USDINR depreciation of 7% YTD in 2026,” says Dr. Renisha Chainani, Head of Research at Augmont.
Why Is Indian Gold So Much More Expensive?
Two major reasons have driven the price divergence.
Reason 1: Import Duty Hike
The government effectively raised the import duty on gold from 6% to 15% — including a 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess (AIDC). This 9 percentage point hike translates directly into a higher cost of gold for importers — and that cost is passed on to buyers.
The impact on prices was immediate. Between May 6 and May 12, gold was trading around Rs 1.5 lakh per ten grams. After the import duty hike announcement, prices hit a new high of Rs 1.6 lakh on May 14 — and have remained elevated, trading around Rs 1.56 lakh since then.
In addition to the duty hike, government rules were also tightened for gold imports linked to exports under the advance authorisation scheme. This is likely to further tighten supply over the long term, keeping prices elevated.
Reason 2: Rupee Depreciation
The Indian rupee has depreciated nearly 7% against the US dollar year-to-date in 2026. Since gold is priced in dollars globally, a weaker rupee means Indians automatically pay more for the same amount of gold, even if international prices do not move.
How is the Gold Price in India Determined?
The gold price in India is largely driven by international market prices, specifically the LBMA Gold Price. But import taxes are added on top, making the landed price of gold the international price adjusted for import duties and currency movement.
What Happens if Prices or the Rupee Fluctuate?
“If global gold rises and INR weakens further, Indian prices may rise even faster. Even if international prices correct, domestic prices may not fall sharply if the rupee stays weak,” says Sunil Katke, National Head — Commodities Retail Business, Kotak Securities.
Will the Price Gap Close?
History suggests the gap is here to stay — at least for now. Since 2012, the government has hiked import duty on gold several times, with reductions on only two occasions — in 2021 and 2024. “A meaningful reduction in import duties could narrow the gap between Indian and global prices, which doesn’t seem likely,” adds Katke.
“The difference will continue as long as the 15% duty remains in place and fresh inventory at the old cost clears. Domestic prices will sustain a structural premium over international prices until import costs normalize,” says Dr. Chainani.
But There Is a Twist — Gold Is Currently at a Discount
Despite all of this, there is an interesting market dynamic currently at play. According to the World Gold Council, “Domestic gold prices have not yet fully reflected the duty hike amid weak demand and ample supply, and therefore, local markets are currently in deep discount from the landed price.”
How did this happen? After the import duty hike, traders rushed to sell physical gold to book profits, thereby boosting supply precisely when physical buying was weakening. Bullion dealers also likely offloaded inventory that had been imported at the old, lower duty rates — adding further to market supply.
According to the World Gold Council, “The rise in domestic prices post the duty hike triggered profit-taking by investors, boosting supply even as physical buying weakened, and bullion dealers likely offloaded inventory imported at lower duty rates, adding to market supply. The discount widened from an average of US$14/oz the week before the duty hike to nearly US$150/oz.”
This price action occurs amidst subdued jewellery demand in the Indian gold market, attributed not only to high prices but also to seasonal factors. With summer wedding purchases largely completed, mid-May to mid-June is considered an inauspicious period for gold buying.
The bottom line: Indian gold prices are structurally higher than global prices, and that premium is unlikely to disappear as long as the 15% import duty remains in place and the rupee stays weak. The current discount from landed price is a temporary phenomenon driven by a supply glut, not a signal that prices are about to fall.
Disclaimer: This article is intended for general awareness only and should not be construed as investment, financial, or trading advice. Gold price data, import duty changes, and currency movement figures cited are based on publicly available information and are subject to revision. The price differential between Indian and global gold markets may narrow or widen based on government policy changes, currency movements, and international market conditions. Readers are advised to conduct independent due diligence and consult a SEBI-registered investment advisor before making any gold investment or purchase decisions.