Investors rush to gold ETFs due to rising import duties on the yellow metal.

As investors move away from physical bullion due to an increase in import duties, gold ETFs surge.

Gold exchange-traded funds (ETFs) have surged in response to India’s decision to increase import duties on gold and silver to 15%. This is because investors are moving away from physical bullion in favor of more affordable and liquid alternatives, even as the government works to reduce non-essential imports and safeguard foreign exchange reserves.

🥇 The Overarching Context: Reasons for the Increase in Duty
The government increased import taxes on gold and silver from 6% to an effective 15% on May 13, 2026. This increase was made up of a 5% Agriculture Infrastructure and Development Cess (AIDC) and a 10% basic customs charge. The action was intended to reduce record imports, which reached an all-time high of $71.98 billion in FY26 despite a 4.76% decline in bulk terms to 721.03 tonnes. It came after Prime Minister Modi appealed for a one-year embargo on discretionary gold purchases.

Approximately 9–10% of India’s overall import bill came from gold purchases, adding to the strain already placed on the country’s foreign exchange reserves by the conflict in West Asia and rising crude oil costs. The urgency of the government’s decision was increased when the rupee fell to a record low of 95.63 against the US dollar.

⚖️ The Change in Structure: ETFs Acquire the Advantage
The landed cost of actual gold was effectively increased by the duty increase. However, gold ETFs are structurally preferable for new-money allocation since they do not bear the same import-duty burden because they are backed by actual gold kept in vaults. According to Dr. Renisha Chainani of Augmont, “ETFs carry zero import duty burden, while physical gold is now 15% more expensive at import.”

According to experts, this might hasten the long-term transition from physical to financial gold. “The PM’s appeal, combined with the sharp increase in import duties, is likely to accelerate the shift from physical gold toward financial gold products such as Gold ETFs and Gold Fund of Funds (FoF),” said Manoranjan Sharma of Infomerics Ratings.

📈 Market Reaction: Jewelry Stocks Mixed, ETFs Rising
The duty increase caused gold ETFs to react significantly. Silver Bees increased by almost 7%, while Nippon India’s Gold Bees, the biggest gold ETF on the BSE, closed 5.7% higher. Other significant ETFs, such as the Tata Gold ETF, ICICI Prudential Gold ETF, and HDFC Gold ETF, saw increases of 4–6%.

Silver futures increased 6.6% to ₹2,97,499 per kg, while gold futures increased 6% to ₹1,62,621 per 10 grams on MCX.

Performance of Fund Category Key Gainers
Gold ETFs: ICICI Prudential Gold, HDFC Gold, Tata Gold, Kotak Gold, Nippon India Gold Bees ≈ 4–6.5%
Silver ETFs: 5–7% for Nippon India Silver Bees, Tata Silver, HDFC Silver, and DSP Silver
Up to 8% for gold financiers Manappuram Finance and Muthoot Finance
The trend for jewelry stocks was mixed: Senco Gold increased 4.1%, Kalyan Jewellers sank 1.9%, and Titan closed 1% higher following an earlier decline. Higher gold prices increased the value of jewelry held as collateral, which benefited gold financiers.

📊 The Big Picture: ETFs Surpass Demand for Jewelry
The trend toward gold exchange-traded funds (ETFs) is not new; it has been gaining traction for more than a year.

In September 2025, gold ETFs in India achieved a record **10 billion AUM, powered by 902 million monthly inflows.

In September 2025, inflows into gold ETFs increased 578% year over year to ₹8,363 crore, with a five-year compound annual growth rate of 69.5%.

Almost one-third of the world’s ETF demand in Q1 2026 came from India, and this trend persisted into FY26. From ₹61,422 crore in April 2025 to ₹1.78 lakh crore in April 2026, the AUM of gold ETFs soared. In the same time frame, silver ETFs increased even more quickly, from ₹15,477 crore to ₹81,944 crore.

Gold ETF inflows totaled ₹24,000 crore in January 2026 alone, almost equal to the month’s entire inflows into equities mutual funds.

The demand for gold investments is currently surpassing that of jewelry. Demand for jewelry (66 tonnes) was almost equal to that of bars and coins (62 tonnes) during the most recent period.

🔍 Expert Opinions
Expert Perspective
Chirag Mehta, Quantum AMC’s CIO.Current gold investors will benefit right away. For current holders, duty increases result in immediate mark-to-market gains. During abrupt demand increases, tracking inaccuracies and temporary premiums over NAV may increase.
Nair v. Hareesh (Geojit Investments)Panic selling is not necessary; investors should keep making methodical purchases. Our market is being strengthened by this climate.
Dr. Renisha Chainani (Augmont) “ETFs are structurally superior for allocating fresh money because they have no import tariff burden. Gold ETF investment in the SIP approach can grow in popularity.
Infomerics Ratings’ Dr. Manoranjan SharmaThe tariff increase may increase the value of gold by making it more scarce and attracting more investors. Because ETFs are more convenient and need less storage, some investors may switch from actual purchases.
Note on Quantum Mutual FundsDue to market inefficiencies, inventory effects, and postponed purchases at high price levels, the 9 percentage point duty hike only caused a 6% increase in domestic prices.
📅 India’s Gold Import Duty Schedule (2022–2026)
In light of the Russia-Ukraine conflict, duty was increased to 15% in 2022.
2024 duty reduction to 6% to support the jewelry and gem industries and reduce smuggling
May 13, 2026: Due to the West Asia crisis and currency pressure, duty was raised back to 15% (10% BCD + 5% AIDC). 🔮 Outlook: What’s Next
Analysts predict that investor demand for gold will continue to be high despite the government’s intention to reduce non-essential imports, primarily due to ETFs. The World Bank expects gold to average 4 , 700 p e r o u n c e ∗ ∗ i n 2026 [ r e f e r e n c e : 31 ] , w h i l e G o l d m a n S a c h s p r e d i c t s a y e a r − e n d t a r g e t o f ∗ ∗ 4,700perounce∗∗in2026[reference:31],whileGoldmanSachspredictsayear−endtargetof∗∗5,400, driven by central bank diversification and Fed rate cuts.

Fund houses are aligning their strategies with national interests, as seen by HDFC Mutual Fund’s withdrawal of its proposed Gold-Silver Passive Fund of Fund NFO due to worries about growing reliance on imports and the government’s austerity measures.

Gold as a hedge is still supported by the larger macroeconomic picture, which includes a weak rupee, geopolitical uncertainties, and high global gold prices. According to one analyst, “This environment is actually strengthening our market.”

💎 Important Lessons for Investors
Particularly in a high-duty setting, gold ETFs provide an affordable, transparent, and liquid substitute for actual gold.

After the duty increase, current gold ETF holders have already profited from mark-to-market gains.

Retail investors are projected to become more interested in systematic investment plans (SIPs) in gold exchange-traded funds (ETFs).

Tracking mistakes may increase at times of abrupt demand increases, so investors should keep an eye on them.

Gold’s function as a portfolio hedge is strengthened by duty increases, which traditionally provide current holders with instant benefits.

Citations from IndiaReport on today’s ETF move and duty increase

Coverage on the Times of India ETF rally

Performance of the Moneycontrol Gold ETF

NDTV ETF Profit versus Jewelry Demand

Coverage of Business Standard ETFs

Reuters’ $10 billion AUM milestone (via Moneycontrol)

Business Standard 578% increase in inflow

Rationale and timeframe for the Business Standard tariff hike