The domestic precious metals market is adjusting to a major policy reset. The government has raised import duty on gold and silver by about 9%, including cess. At the same time, silver imports have shifted from ‘free’ to ‘restricted’ status, while gold imports now face tighter controls.
While these domestic measures were introduced to manage the national reserve, they have raised concerns about local supply, pricing transmission, and the premiums on exchange traded funds (ETFs).
Despite near-term uncertainty, experts maintain a constructive long-term view. They argue that current supply constraints and pricing frictions are temporary, while global macro drivers remain supportive.
Price transmission
Following the announcement, domestic prices did not fully reflect the 9% duty hike immediately.
"The day the import duty hikes were announced, the next day we saw an increase in prices of close to five to 6%, whereas duties were increased by 9%," noted Chirag Mehta, chief investment officer at Quantum Asset Management Company.
Mehta said the partial transmission could be due to large inventories already priced at healthy margins, or weak consumer appetite for a sharp 9% jump. He expects full price transmission over the coming weeks as fresh imports are required.
In the short term, prices may remain range-bound.
Manav Modi, commodities analyst at Motilal Oswal Financial Services, expects gold to trade steadily for a few weeks amid a temporary lull in global triggers. However, he remains bullish over a one-year horizon.
"From a one-year perspective, the price outlook remains positive, where the targets are about $6,000," said Manav.
ETF premium risk
The bigger concern lies in ETF premiums — the extra cost investors pay over the underlying net asset value.
With silver now in the restricted category, supply windows could tighten if demand spikes.
Manav cautioned that panic buying could distort ETF pricing.
"ETFs could be something which may be bought in, that may lead to premiums from the outlook perspective," he said.
Mehta highlighted that silver faces sharper constraints than gold.
"There are more restrictions on silver as opposed to gold... if the demand picks up again, then probably, given the restriction on supply, there could be an impact on premiums," Mehta explained.
However, if demand remains subdued, premiums may not build up.
Silver ETF premiums have surged before. Around 9 October 2025, festive demand and a global supply deficit led to a physical shortage of silver bars, pushing Silver ETF prices up to 12% above NAV. In January 2026, premiums rose again amid retail frenzy and continued supply tightness.
Supply concerns
"We had a good import on the domestic front in the past quarter, and the last two years' import numbers have been good, so an immediate shortage is unlikely," clarified Manav.
Experts say a visible supply disruption would occur only if retail panic triggers abnormal demand.
Mehta added that strong existing inventories have shielded the market so far, though fresh imports will eventually be necessary.
Investors are tracking global cues to assess when prices may cool.
Manav said markets are watching the US Federal Reserve’s rate trajectory under its new governor, global central bank actions, USD-INR movements, and Comex prices.
Short-term oil spikes may pressure inflation and sentiment. However, historically, higher oil prices reinforce gold’s appeal as a long-term inflation hedge.
Should you wait to invest in gold and silver?
“I think that for silver and gold already means they have rallied very well, and now, if you see the current situation, I do not expect a very positive outcome. So, if somebody wants to increase the allocation, I'll say they should avoid but if one does not have any allocation in gold and silver, we always suggest that you should have a 10-15% allocation in these metals of your portfolio via ETFs,” said Pankaj Mathpal, founder of Optima Money Managers.
He added that investors without exposure should consider staggered investing, especially via SIPs.
“There's no reason to wait or anything, but right now is not the right time to enter gold or silver with a lump sum,” he warned, concluding that one can stick to maintaining their allocation of 10-15% exposure to precious metals.