Gold And Silver ETFs Jump Up To 6% Amid Duty Hike; Jewellery Stocks Decline

Gold and silver exchange traded funds (ETFs) rose sharply on May 13 after the government increased import duties on gold and silver to 15% from 6%, according to government orders issued on Wednesday. The move was aimed at reducing pressure on foreign exchange reserves amid rising economic stress linked to the ongoing Middle East conflict.

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Domestic gold futures surged 7.2% to ₹1,64,497 per 10 grams, while silver futures climbed 8% to ₹3,01,429 per kilogram following the duty hike. Higher import duties increase the landed cost of precious metals, leading to a sharp rise in domestic prices.

The government’s decision came after Prime Minister Narendra Modi appealed to citizens to avoid gold purchases during the current economic situation. 

Gold And Silver ETFs See Strong Gains

Gold and silver ETFs witnessed strong buying interest as higher physical gold and silver prices improved the attractiveness of exchange traded funds.

Nippon India Gold ETF, Tata Gold ETF, HDFC Gold ETF and ICICI Prudential Gold ETF gained between 4% and 6% during the session.

Silver ETFs also moved higher. Tata Silver ETF, Nippon India Silver ETF and HDFC Silver ETF climbed between 4% and 6%.

Jewellery Stocks Under Pressure

Jewellery companies faced selling pressure after the import duty increase raised concerns over weaker consumer demand.

Shares of Titan Company, Kalyan Jewellers and Thangamayil Jewellers declined between 1.5% and 6%.
According to Sumit Singhania, Research Head at Bajaj Broking, higher tariffs may affect discretionary spending on jewellery, coins and medallions as domestic gold prices rise further.

Balaji Rao Mudili, Research Analyst at Bonanza, said the timing of the duty increase could impact consumers during the wedding season. He added that buyers may shift towards lighter-weight jewellery, lower-carat products and studded ornaments to manage higher prices.

Gold Financing Companies Rally

Gold financing companies emerged among the biggest gainers after the rise in domestic gold prices increased the value of gold jewellery pledged as collateral.

Shares of Manappuram Finance, Muthoot Finance and IIFL Finance rose as much as 8%.

Nirpendra Yadav, Senior Commodity Research Analyst at Bonanza, said higher customs duties may reduce official bullion imports and support the rupee and current account deficit. However, he added that slower jewellery demand could increase the risk of gold smuggling.