Prime Minister Narendra Modi has urged households to pause gold buying as India tries to rein in a widening trade deficit that is weighing on the rupee. Gold and silver account for around 11% of total imports, while oil represents about 22%. The strain has been compounded by higher energy costs: India imports nearly 85% of its fuel, and about 50% of its crude imports transits the Strait of Hormuz. Against that backdrop, the government raised customs duties on gold from 6 to 15% in May, yet Titan Company still posted a 63% profit rise in the second quarter alongside higher store footfall.
Import pressures have continued to build. India’s merchandise trade deficit topped $330bn in the financial year ending March 2026, up from over $280bn a year earlier, a 17.9% increase. After two weak months, gold imports doubled in July from 20 tonnes in June to an estimated 40–45 tonnes, while World Gold Council data showed jewellery sales rising by about one-third year-on-year to $21bn in Q2 and merchant revenues up 30–60%. Demand remains broad-based, with around two-thirds originating outside urban centres; a 2018 ICE360 survey found one in two households bought gold within five years, 87% own gold, and more than 75% of families in the bottom income decile hold some.
Gold Demand and Trading Opportunities During Festive Season
We see a clear, high-probability opportunity for derivative traders as India heads into its peak festive and wedding season. Despite the government’s aggressive hike in import duties to 15 percent, the country’s voracious appetite for gold is rebounding sharply. This means we should position ourselves for a major surge in gold futures and call options over the coming weeks.
Historically, Indian gold demand spikes during the September-to-November period, driven by key festivals like Dhanteras and Diwali. In past years, even when local gold prices hit record highs of over 75,000 rupees per 10 grams, physical buying barely flinched. With local jewelers actively restocking their inventories right now, we expect domestic MCX gold contracts to experience strong upward momentum.
Rupee Depreciation and Macro Trading Strategies
At the same time, we must look at the macroeconomic pressure and short the Indian rupee. The nation’s massive trade deficit, which hit $330 billion for the fiscal year ending March 2026, is putting immense pressure on the local currency. Buying USD/INR long futures is a highly effective way to capitalize on this ongoing rupee depreciation.
Unstoppable gold imports, combined with high global crude prices, are severely widening India’s current account deficit. Data shows that when the trade gap expands at this rate, the rupee historically experiences sharp downward adjustments against the greenback. We recommend utilizing bear put spreads on the rupee or long call options on USD/INR to leverage this macro trend.
