The Union Budget 2026–27, presented by Finance Minister Nirmala Sitharaman, has triggered major volatility in India’s precious metals market, with gold and silver prices experiencing sharp swings, futures market crashes and reactions from traders, investors and consumers alike. What started as a rally earlier this year has turned into a period of intense market action as budget decisions and broader macro trends play out.
Sharp Price Declines on Budget Day
On Budget day (1 February 2026), gold and silver prices plunged dramatically on the Multi Commodity Exchange (MCX):
- Gold futures dropped nearly 6–9 % and hit lower circuit limits intraday, reflecting heavy selling pressure and profit-booking. Precious metals fell sharply from recent peaks before retracing some losses later in the session.
- Silver prices saw even steeper declines in futures trade, with early sessions showing falls around 6–12 % as traders reacted to market cues and shifting macro sentiment.
The volatility reflected not just domestic budget impact but wider global sell-offs and profit booking ahead of the budget speech, which tempered risk appetite.
Budget Policy: Customs Duty and Taxes on SGBs
One of the key investor concerns in the Union Budget was taxation of precious metal investments:
- The Budget did not alter the basic customs duty on gold and silver, which currently stands at 6 % plus 3 % GST for bars and bullion — a tax structure in place since the 2024 duty reduction. Customs duty remains unchanged in the 2026 budget announcements.
However, a significant change was introduced for Sovereign Gold Bonds (SGBs):
- From 1 April 2026, the capital gains tax exemption on SGBs purchased in the secondary market will be removed. Investors will only retain tax exemption if they buy SGBs directly when issued and hold them until maturity. This change caused a sharp decline (around 10 %) in SGB prices on the NSE.
This tax move is expected to reduce demand in the secondary SGB market, potentially leading investors to favour direct purchases or physical bullion instead.
What Caused the Sudden Price Swing?
Multiple factors have contributed to the sharp moves in gold and silver around the Budget:
- Pre-Budget speculation about customs duty cuts or changes in bullion taxation led to profit booking. Traders had anticipated some relief in import duties, which didn’t materialise.
- Global market pressure preceding the Budget — influenced by risk-off sentiment, profit taking and stronger dollar forces — triggered larger sell-offs in precious metals globally, transmitting to Indian markets.
- Budget uncertainty and investor positioning before the Finance Minister’s speech caused traders to de-risk, pushing futures prices sharply downward before a partial correction later in the day.
Additionally, macroeconomic authorities indicated the government and RBI are monitoring the rupee, gold and silver markets closely to preserve stability, suggesting policy backing to cushion excessive volatility.
Impact Across India: Jewellery and Retail Prices
Gold jewellery prices across major Indian cities — including Delhi, Mumbai and Bengaluru — have reflected the downward price pressure post-Budget, with leading retailers reporting declines in 22-carat rates. This trend typically translates into lower making charges and retail cost adjustments for consumers.
Investor & Expert Outlook: Volatility and Opportunity
Market analysts and commentators highlight a mixed outlook:
- Short-term volatility is expected as markets digest Budget signals, global influences and the new SGB tax regime. Price swings in gold and silver could continue to be broad as traders rebalance positions.
- Some commodity strategists see the sharp correction as a “healthy reset” after extended run-ups from late 2025. However, gold and silver are not risk-free assets, and their prices can oscillate more sharply than perceived safe havens.
- Retail investors may find periods of lower prices an opportunity for physical purchases or long-term investment planning — provided they consider tax changes and market risk carefully.
Consumer preferences are also shifting in the jewellery market, with some buyers exploring alternative luxury items like lab-grown diamonds, which are gaining appeal amid precious metal price swings and volatility.
Should You Buy or Sell Gold & Silver Now?
Experts caution that:
- Near-term trading remains speculative: Volatility remains, and prices could oscillate before finding a stable range.
- Budget policy clarity has reduced uncertainty around customs duty, but the SGB tax change adds a new variable for investors.
- Long-term fundamental demand — including jewellery demand, central bank purchases and macro diversification trends — could support precious metals over time despite short-term corrections.
Market observers suggest watching support and resistance levels and macro cues such as the rupee’s direction, global bullion benchmarks and inflation sentiment before making major investment decisions.
Summary
The Union Budget 2026 triggered strong reactions in India’s gold and silver markets — with sharp price dips, futures selling pressure and significant investor focus on tax changes, particularly for Sovereign Gold Bonds. While customs duty remained unchanged, the new capital gains tax rule for SGBs and broader market forces led to volatile trading. Investors and consumers are now weighing opportunities and risks in a dynamic precious metals landscape shaped by both policy and macroeconomic sentiment.
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Last Updated on: Monday, February 2, 2026 4:35 pm by Praneetha Kattamidi | Published by: Praneetha Kattamidi on Monday, February 2, 2026 4:35 pm | News Categories: Brand Post, Economy, Trending
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