Gold prices soared by Rs 8,550 to a little over Rs 1.65 lakh per 10 grams in the local market here on Wednesday after the government increased the import duty on precious metals to 15 per cent.

Silver prices jumped by Rs 20,500 to Rs 2,97,500 per kg in Delhi markets from Rs 2,77,000 per kg (inclusive of all taxes) on the previous day, according to the All India Sarafa Association.

Gold of 99.9 per cent purity increased by Rs 8,550, or over 5 per cent, to Rs 1,65,350 per 10 grams (inclusive of all taxes) from the previous close of Rs 1,56,800 per 10 grams.

The government on Wednesday sharply hiked import duty on gold and silver to 15 per cent from 6 per cent earlier to discourage purchase and trim non-essential imports in the backdrop of a ballooning import bill amid the West Asia crisis.

Also, import duty on platinum has been raised to 15.4 per cent from 6.4 per cent. Consequential changes have also been made to other items such as gold/silver dore, coins, findings, etc. The new duties are effective from Wednesday.

The duty hike follows Prime Minister Narendra Modi’s clarion call for curbs on gold purchases, along with other austerity measures, to reduce avoidable foreign-exchange expenditure.

Local traders said the actual impact of the higher levy would play out over the coming days once the increased duty begins reflecting in purchase bills.

“The recent hike in India’s gold import duty is likely to raise local prices and temporarily dampen physical demand. However, investors should not view this as a reason to panic. Gold continues to hold its appeal as a safe-haven asset, particularly in times of global uncertainty and domestic currency pressures,” Hareesh V, Head of Commodity Research, Geojit Investments Ltd, said.

A weak rupee also inflated the prices of precious metals, analysts said. The rupee dropped to a low of 95.80 against the US dollar amid concerns over forex outflows and high crude oil prices.

India is the world’s second-largest consumer of precious metals, and prices have rallied in recent months amid an unabated rise in demand, including for investment purposes. Gold is India’s second-largest commodity import after crude oil, and rising purchases have added to foreign-exchange outflows, pressuring the rupee to record lows.

The Gem & Jewellery Export Promotion Council cautioned that raising gold import duty does not curb imports but inflates prices.

Jewellery retailers stated that imposing quantitative restrictions on gold and silver imports, rather than raising import duties, would be a more effective way to curb the country’s current account deficit.

Brent crude traded above the USD 107 per barrel level in global markets on Wednesday.

However, in the overseas markets, Spot gold slipped by 0.3 per cent to USD 4,700.86 per ounce while silver gained 1 per cent to USD 87.45 per ounce.

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