Following Prime Minister Narendra Modi’s appeal to refrain from purchasing gold, the market witnessed an unusual flurry of activity as crowds rushed to sell their holdings in anticipation of a price drop. This selling spree continued through Monday and Tuesday until a hike in import duty shifted the momentum, plunging the market into a state of uncertainty. By Wednesday, volatile price fluctuations left the public hesitant, caught in a dilemma over whether to buy or sell.

On Wednesday, gold values experienced extreme volatility, surging and crashing within a two-hour window that left the industry in total disarray.

S. Abdul Nazar, general secretary of the Kerala Gold and Silver Merchants Association, says the Prime Minister’s announcement had triggered a selling frenzy among panicked individuals anticipating a price collapse. “However, the subsequent import duty hike from 6% to 15% reversed the trend, causing those who liquidated their assets to feel immediate remorse. Although numerous clients visited showrooms mid-week intending to trade, most departed frustrated because the rapid fluctuations prevented jewellers from establishing a fixed market rate,” he says.

Retailers reported that a sovereign’s price jumped by roughly ₹10,200 on Wednesday morning, only to fluctuate twice during the afternoon as rates dipped by nearly ₹5,000. “While we are flooded with inquiries today (Wednesday), it is clear that record highs won’t deter buyers entirely given the metal’s cultural significance. However, the stark reality is that customers will now walk away with significantly less volume for the same investment they would have made some time ago,” says S. Palani, a merchant.

Hoping to safeguard their wealth against an expected price correction, numerous citizens had responded to the Prime Minister’s appeal by immediately offloading their gold. “When the call to stop buying came, I assumed a total lack of demand would naturally force prices to plummet. My plan was to sell everything immediately and reinvest when the market hit rock bottom, potentially doubling my holdings. Instead, the sudden duty hike turned my strategy into a disaster; now, with rates swinging so violently, I can no longer afford to repurchase the very gold I let go of just two days ago,” says Surekha, a retired teacher from Kochi.

Dilemma

For households preparing for nuptials, the market volatility has created an agonising predicament. Chandramohan, a resident of Pathanamthitta, described the situation as a financial deadlock. “We feel completely cornered. Purchasing now feels like a gamble because a sudden price crash would mean squandering our life savings. Yet, if we hesitate and rates skyrocket further, our budget might only secure half the jewelry we originally planned for,” he says.

Meanwhile, Mr. Nazar points out a paradoxical consequence of the fiscal policy, noting that while raising the import duty from 6% to 15% aims to suppress legal arrivals, it inadvertently fuels underground trade. “Interestingly, historical data shows that India once imported 1,000 tonnes of gold even when the duty was 15%, whereas imports dropped below 800 tonnes when the rate was only 6%. Currently, smuggling in a single kilogram of gold yields a profit exceeding ₹20 lakh; when combined with the evasion of 3% GST in the parallel market, smugglers stand to gain a staggering ₹24 lakh a kg,” he says.