Gold prices have fallen sharply from their January record highs, but Indian buyers have seen a smaller correction than investors in international markets. Global spot gold has declined around 24% from its January peak, while prices in Delhi have fallen approximately 20% over the same period.
The difference is largely explained by three factors: higher import duty, a weaker rupee and unusually high premiums that domestic traders charged when gold prices were at their peak. Together, these factors have prevented domestic prices from tracking the international correction entirely.
For Indian consumers, this also means that the global fall in gold prices has not translated into an equivalent reduction in the cost of buying jewellery, coins or bars.
Higher import duty has supported domestic prices
International gold prices fell from a record closing level of $5,379 an ounce on 29 January 2026 to $4,068.71 on 6 November, a decline of around 24%.
In comparison, 99.9% pure gold in Delhi closed at ₹1,46,300 per 10 grams on Dhanteras, against its January record of ₹1,83,000, according to the All India Sarafa Association. This represents a decline of approximately 20%.
One major reason for the difference is the increase in gold import duty.
On 13 May, the government raised the effective import duty on gold from 6% to 15%. This comprises a 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess (AIDC).
The increase raised the landed cost of imported gold, cushioning the impact of falling international prices on the domestic market.
For consumers, this means that a decline in global bullion rates does not necessarily translate into an equally sharp reduction in local gold prices. Buyers also pay 3% GST on gold purchases, apart from applicable jewellery-making charges.
Rupee depreciation has limited the fall
The second factor is the rupee-dollar exchange rate. Since international gold is priced in dollars, a weaker rupee makes gold imports more expensive in domestic currency terms.
The rupee was trading at around ₹92 against the dollar on 29 January, when gold touched its record. It subsequently weakened to a record low of ₹96.96 in May before recovering.
On 6 November, the rupee closed at ₹93.905 against the dollar, around 2% weaker than its January level, according to Reuters.
This depreciation has partly offset the decline in international gold prices. Even when dollar-denominated gold becomes cheaper, Indian buyers may not receive the full benefit if the rupee loses value against the US currency.
However, the rupee’s recovery from its May lows has reduced the extent of this cushion.
Why the domestic price correction was not even smaller
Higher import duty and rupee depreciation alone would suggest that Indian gold prices should have fallen even less. However, another factor contributed to the unusually high domestic prices in January: premiums charged by bullion traders.
Ahead of the Union Budget, traders expected the government to increase gold import duties. This led domestic dealers to charge premiums of up to $112 an ounce over official domestic prices on 21 January, Reuters reported.
The Budget on 1 February did not increase import duties. When the government eventually raised them in May, domestic premiums moved in the opposite direction.
Dealers offered discounts of up to $207 an ounce in the week following the duty increase, as demand weakened and scrap gold supply increased.
By mid-October, premiums had largely normalised, with dealers quoting premiums of up to $7 an ounce.
Consequently, the removal of the unusually high January premium contributed to the subsequent domestic price correction.
What does this mean for gold buyers?
The relatively smaller decline in domestic gold prices does not necessarily mean Indian consumers have escaped the correction. Higher import duties continue to make gold expensivewhile currency movements influence the price at which imported bullion reaches the domestic market.
Despite the correction, gold in Delhi was still around 10% more expensive on Dhanteras this year than last year, when it traded at ₹1,32,400 per 10 grams.
The higher prices have also affected demand. The World Gold Council expects India’s gold demand to fall to around 650 tonnes in 2026, its lowest level since 2020.
For buyers, therefore, tracking international gold prices alone may not provide an accurate picture of domestic prices. Import duty, the rupee-dollar exchange rate and local premiums also determine how much consumers ultimately pay for gold.
Source: www.livemint.com
