Gold prices in India jumped to a record on Friday following an unexpected increase in import duty on the metal in the Budget 2019 presented on Friday. The hike severely hit demand for the metal among domestic buyers, forcing dealers to offer the highest discount in nearly three years.

According to a Reuters report, dealers in India were offering discounts of up to $30 (Rs 2,053) an ounce (28.3 grams), the highest since August 2016, over official domestic prices.

Finance minister Nirmala Sitharaman raised the import duties on gold and other precious metals to 12.5 percent from the earlier 10 percent in her first union budget presentation. Experts say that the move could not only dampen retail demand but also boost smuggling.

A proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji, told Reuters that even after the steep discount, people were unwilling to make purchases.

Gold futures jumped by over 2 percent after the budget announcement to hit a record high of Rs 35,100 per 10 grams while local gold prices have risen more than 11 percent in six weeks.

The Reuters report said that jewellers in Mumbai were not buying gold ahead of the budget as they were expecting a cut in import duty. The surprise increase has created a confusing situation for the dealers as the old inventory is available at steep discounts but demand has become weak.

In fact, many are selling gold to book profits from the price increase.