Trust is gold.

"The central government has raised customs duties on imports of precious metals, including gold and silver from 6% to 15%, just days after Prime Minister Narendra Modi urged people to adopt austerity measures such as deferring decisions to buy gold by one year to save precious foreign exchange." HT. As an unintended consequence, "Indian jewellery market is seeing a surge in gold purchases, with sales up 15-20% after PM Modi asked people to delay gold spending." Customers are rushing to buy bridal jewellery due to fears of higher import duties or GST changes." Whalesbook. The rise in taxes on gold is great news for smugglers. In 2025, "Gold smuggling into India has spiked ahead of key festivals," although, "Smuggling of gold into the world's second biggest buyer of the precious metal had fallen after the government slashed import taxes on it to 6% from 15% last year." As "Gold prices in India hit a record Rs 128,395 per 10 grams," "smuggling a kilogram of gold is very lucrative for grey market operators, with margins exceeding Rs 1.15 million from dodging the 6% import duty and a 3% local sales tax." The margin had fallen to Rs 630,000 per kg after duty reduction. "In the 2024/25 fiscal year ended in March, government agencies registered  3,005 cases of gold smuggling and seized 2.6 metric tons of the metal." Reuters. Customs duty on gold is changed quite frequently. It was 4% in 2012, rose to 10% in 2013, then to 12.88% in 2019 and to 15% in 2022, before being slashed to 6% in 2024. primeinvestor.in. In 2015, the government introduced Sovereign Gold Bonds which were priced at the market value of 24 carat gold. This allowed Indians to invest in gold without actually buying the metal and since this was priced in rupees it saved foreign exchange for the government. wikipedia. However, by the time the bonds came up for redemption the price of gold had shot up, imposing a fiscal strain on finances and so customs duty was slashed to reduce the amount of payout. People perceived this as a loss due to price fixing. Indians buy gold as a hedge against government policy. Average consumer price index (CPI) inflation in India has been above 5% in most years since 2014 (rateinflation.com) , whereas it was below 2% in the US, rising to 4.7% in 2021, 8.0% in 2022 and 4.1% in 2023, dropping to 2.6% in 2025. usinflationcalculator.com. The Reserve Bank of India (RBI) did not increase interest rate to bring down inflation rates since August 2018, increasing it by 40 basis points in an emergency meeting in May 2022. ET. As a consequence the rupee has fallen from 62 to the dollar in 2014 (bookmyforex.com) to over 95 rupees to one dollar today (xe.com). Indians are not allowed to invest in foreign currency, known as capital account convertibility (tatamutualfund.com) so they buy gold which is priced in dollars. People do not understand monetary and fiscal policies but they can feel that their money is being transferred to the government. They buy gold. Trust is gold.