Gold's Supply-Side Squeeze: India's 18.45% Tax Joins Central-Bank Appetite as US Yields Bite
Published on 05/18/2026 at 06:14 | Redaktion boerse-global.de
The gold market is caught in a tug-of-war that has split participants into two camps. On one side, private investors are backing away as rising US bond yields erode the appeal of the non-yielding metal. On the other, state actors are piling in with relentless purchases, absorbing the supply that retail sellers release. Adding a fresh twist, India — the world's second-largest gold consumer — has more than doubled the effective import duty on bullion, sending a shockwave through the physical market.
Gold settled at $4,555.80 an ounce on Friday, suffering a weekly decline of roughly 3.5%. That leaves the precious metal about 16% below its 52-week peak of $5,450, though it still clings to a year-to-date gain of nearly 5%.
India doubles down on import restrictions
Effective May 13, India raised its basic customs duty on gold to 15% from 6%. When combined with the integrated goods and services tax, the total levy on bullion imports now stands at 18.45% — more than twice the previous burden. The move came as pressure mounted on the country's foreign-exchange reserves, exacerbated by elevated energy prices linked to tensions in the Strait of Hormuz. Prime Minister Modi had earlier made a public appeal for citizens to voluntarily curb their gold purchases.
The following day, the Directorate General of Foreign Trade imposed a fresh constraint: gold imports under the Advance Authorisation programme — which allows exporters of jewellery to bring in bullion duty-free — are now capped at 100 kilograms per licence. Previously there was no such limit. The measure aims to prevent misuse of the concession.
Should investors sell immediately? Or is it worth buying Gold?
US inflation dashes rate-cut hopes
Across the Atlantic, macroeconomic data is delivering a headwind of its own. The US consumer price index rose 3.8% year-on-year, hotter than expected, while producer prices posted their largest monthly gain since 2022. The combination has effectively killed any prospect of a Federal Reserve rate cut in June; according to the CME FedWatch tool, the probability has fallen to near zero. Indeed, markets now assign a roughly 50% chance of a rate hike by December.
Ten-year US Treasury yields have responded by rising to 4.54%, reinforcing the opportunity cost of holding gold. Higher real yields and a stronger dollar are classic headwinds for the metal, and the price has reacted accordingly.
Central banks buy through the weakness
Yet for every seller in the private market, there is a central bank ready to step in. The People's Bank of China added another 8 tonnes of gold to its reserves in April, extending its buying streak to 18 consecutive months. China's total official holdings now exceed 2,321 tonnes. Beijing is also preparing to ease import rules for gold bars, a move intended to support the yuan by channelling domestic savings into bullion rather than foreign currency.
Poland and Uzbekistan have also emerged as significant buyers this year, taking advantage of the dip to build strategic reserves. At a global level, central banks purchased 244 tonnes of gold in the first quarter of 2026 — a period that saw overall gold demand, including OTC investment, hit a record 1,230.9 tonnes, up 2% year-on-year. Bar-and-coin demand reached its second-highest quarterly level on record.
Gold at a turning point? This analysis reveals what investors need to know now.
Chart support and the outlook
Technically, gold is testing the 0.382 Fibonacci retracement level at around $4,540. Analysts consider the bullish scenario intact as long as the $4,380 zone holds. The next major catalyst arrives with the release of the Federal Open Market Committee's minutes on May 20; the previous meeting produced four dissenting votes, lending unusual significance to the policy discussion.
J.P. Morgan has issued a forecast of $5,055 an ounce for the fourth quarter of 2026, reflecting confidence that structural demand from official institutions will continue to underpin prices. For now, the market's direction hinges on whether real yields retreat — removing the biggest brake on the yellow metal's advance.
Ad
Gold Stock: New Analysis - 18 May
Fresh Gold information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.
Disclaimer regarding our articles: No investment advice, no buy or sell recommendation. Information on prices, companies, and markets is provided without guarantee; changes are possible at any time. Stock market transactions can lead to substantial losses. Our articles are created and reviewed in whole or in part automatically with the support of AI.
