Modi calls for "not buying gold for a year" to ease pressure on the rupee, Indian jewelry stocks plummet in response.

International oil prices continue to rise due to the conflict in Iran, and India, the world's third largest oil importer, is facing severe external balance pressure. To alleviate the depreciation of the rupee and the risk of loss of foreign exchange reserves, Indian Prime Minister Narendra Modi publicly urged citizens last Sunday to avoid buying gold in the next year and to cooperate with a series of measures such as saving fuel, increasing home office, and restricting travel. This statement immediately sparked concerns in the market about the increase in import duties on gold, and Indian jewelry stocks collectively plummeted on Monday. Jewelry stocks fell by more than 6% in a single day, tariff fears spreading Stock prices of major Indian jewelry manufacturers such as Titan, Senco Gold, and Kalyan Jewellers fell between 6% and 9% on Monday. The market is concerned that the government may, under international balance of payments pressure, raise import duties on gold to curb demand. Surendra Mehta, the National Secretary of the All India Gem and Jewellery Domestic Council, said, "The market is concerned that the government may significantly increase gold import duties and maintain them for a year to curb imports. The duties may even be raised to higher levels seen in recent years." It is worth noting that this is not the first time India has used gold tariff measures. In 2012 and 2013, to deal with the rapid depreciation of the rupee, New Delhi twice raised import duties on gold. At that time, the duties reached a high of 15% at one point, and were only reduced to 6% in 2024 to curb rampant smuggling activities. Now the jewelry industry is concerned that this tax reduction measure may be quickly reversed. However, a government official said on Monday that India currently has no plans to increase import duties on gold and silver. This statement temporarily eased some of the panic, but market doubts have not completely disappeared. With 90% of its crude oil imported, meeting strong domestic demand for gold is difficult India's demand for crude oil and about 50% of its natural gas demand relies on imports. After the outbreak of the Iran conflict, Brent crude oil prices surged, directly impacting India's trade balance. This fiscal year, India's international balance of payments deficit is expected to sharply expand to around $66-70 billion, compared to a deficit of only about $26-28 billion in the previous fiscal year. Against the backdrop of high oil prices, state-owned fuel retailers in India have not been able to raise retail prices for a long time. Since April 2022, the prices of gasoline and diesel have remained unchanged, leading to retailers incurring huge losses: currently losing about 100 rupees per liter of diesel (about $1.05) and 20 rupees per liter of gasoline. Despite senior government officials stating on Monday that domestic fuel supply is sufficient, the pricing distortions on the retail side have become unsustainable. The Indian rupee has been under immense pressure. On Monday, the Indian rupee against the US dollar closed at a historic low of 95.31. The Indian central bank has been forced to sell dollars to intervene in the market, while also restricting the size of trading positions held by banks and stepping up efforts to combat arbitrage trading. It is worth noting that India is the second largest consumer of gold globally, and gold holds an irreplaceable position in wedding culture - gold jewelry is seen as an important part of the bride's attire and a popular gift among family and friends. However, India has very little domestic gold production, with almost all demand relying on imports. Therefore, any dynamic in raising tariffs will directly transmit to end prices, causing a significant impact on the jewelry industry and consumers.