Prime Minister Narendra Modi’s recent appeal asking Indians to avoid discretionary gold purchases for the next one year has reignited debate over whether this is the right time to invest in the yellow metal. 

The Prime Minister’s comments come at a time when India is grappling with rising import costs, pressure on the rupee, and heightened geopolitical crisis stemming from the prolonged West Asia conflict. While India continues to maintain relatively strong foreign exchange reserves, policymakers are increasingly concerned about the sharp rise in import-related dollar outflows, especially from gold and crude oil. 

India imports nearly 85–90% of its domestic gold requirement, making bullion one of the country’s largest non-essential imports. In FY26, India’s gold imports surged to a record $71.98 billion, up sharply from nearly $58 billion in the previous year, largely due to soaring global gold prices. 

Since these imports are paid for in US dollars, higher gold purchases directly increase pressure on the country’s foreign exchange reserves and widen the trade deficit. 

A macroeconomic concern, not just an investment issue 

Aditya Agarwal, Co-founder of Wealthy.in, says the government’s messaging is largely driven by macroeconomic concerns rather than an attempt to discourage long-term investing in gold altogether. “Gold imports require dollar payments, which put pressure on foreign exchange reserves, weaken the rupee, and widen the current account deficit,” Agarwal tells Fortune India. “At a time when crude oil prices are elevated and geopolitical tensions remain high, the government is trying to reduce non-essential import outflows.” 

The concern has intensified amid rising oil prices linked to the ongoing US-Israel-Iran war. India imports 80–85% of its crude oil requirement, making elevated energy prices another major source of pressure on the external account. 

According to RBI estimates, every 10% increase in crude oil prices can reduce economic growth by nearly 15 basis points while raising inflation by around 30 basis points. 

Gold now accounts for more than 9% of India’s total imports while the country’s trade deficit widened to $333.2 billion in FY26. Economists estimate that even a 10% reduction in gold imports could potentially save India between $6 billion and $13 billion annually in foreign exchange outflows. 

So, is this the right time to buy gold? 

According to Agarwal, gold continues to remain an important long-term diversification asset, especially during periods of economic and geopolitical uncertainty. However, he cautions investors against aggressively increasing allocations at current elevated price levels. “Investors who are already overweight on gold may use the current rally to rebalance their portfolios rather than significantly increase exposure,” he says. “Those who are underweight can add gold in a disciplined and staggered manner.” 

For buyers, experts say the timing of gold purchases is often driven more by need than by price. Wedding and festive purchases are unlikely to disappear, though consumers may increasingly opt for phased buying or lower-purity jewellery to manage rising costs. For investors, however, the message is clearer: gold remains relevant, but discipline matters more than chasing momentum. 

Agarwal believes multi-asset funds currently offer one of the most practical ways to gain exposure to gold and silver because fund managers dynamically manage allocations depending on market conditions. “Gold and silver together should ideally account for around 15% of an investor’s portfolio,” he adds. 

Ishkaran Chhabra, Chief Investment Counsellor and Founding Partner at Centricity WealthTech, shares a similar view. 

“For physical jewellery buyers, current prices are relatively expensive, making this a less attractive period for discretionary purchases,” Chhabra says. “However, unavoidable purchases such as weddings are unlikely to be postponed significantly.” 

He notes that Indian gold demand remains deeply linked to cultural and household savings behaviour, which makes it relatively resilient even during periods of high prices. 

“In the near term, consumers may shift toward lower-purity jewellery or reduce ticket sizes instead of cancelling purchases altogether,” he says. 

From an investment perspective, Chhabra says gold still works well as a hedge against inflation, currency weakness, geopolitical risks, and volatile equity markets. “Rather than trying to time the market, gradual accumulation through staggered investments remains the more efficient strategy,” he clarifies. 

Import duty hike pushes prices higher 

The government has also raised import duties on gold and silver to 15% from 6% to curb non-essential imports and conserve foreign exchange reserves. The move has sharply increased domestic bullion prices. Gold futures climbed more than 7% to around ₹1.64 lakh per 10 grams while silver prices rose nearly 8%. 

The sharp rise in prices triggered a mixed market reaction. Jewellery companies such as Titan Company and Kalyan Jewellers saw selling pressure amid concerns over weaker consumer demand. 

At the same time, investor interest shifted toward paper gold and silver instruments. ETFs such as those offered by Nippon India Mutual Fund, HDFC Asset Management Company, and Tata Asset Management rallied between 4% and 6% as investors looked for exposure to precious metals without buying physical gold. 

Gold financing companies, including Manappuram Finance, Muthoot Finance, and IIFL Finance also gained, supported by expectations that higher gold prices would improve collateral values and boost loan growth.