Gold, Silver Alert! Why Did PM Modi say not to buy gold for 1 year? Simple Math Of USD-INR-Gold

For a country like India, gold is not just a shiny piece of jewelry to buy. Holding gold has a deeper meaning, deeper love and far more significance in India, one that is rooted within its culture for decades. So when Prime Minister Narendra Modi asked Indians to stop buying gold for a year, it came as a surprise or unusual. However, there is a reason why PM Modi asked citizens to avoid this precious metal.

Why Did PM Modi Say Not To Buy Gold For 1 Year?

PM Modi rolled out a list of practices that could help the economy survive against the latest West Asia war, which has brought global economies to the brink of mayhem.

During his speech in Hyderabad on Sunday, May 10th, PM Modi said, "Petrol-diesel has become so expensive across the world. It is the responsibility of all of us that the foreign exchange spent on purchasing petrol-diesel should also be saved by conserving petrol-diesel."

Amidst this, PM Modi dropped yet another appeal, one that has sent jewelry stocks in a frenzy on Indian stock exchanges on May 11th.PM Modi said, "Gold purchases are another area where foreign exchange is used extensively. In the national interest, we must resolve not to purchase gold for a year."

"I would appeal to people not to buy gold for weddings for one year," said PM Modi.

Now one would wonder, why appeal to avoid gold? That is because there is one thing common when it comes to gold and crude oil for India: they both are linked in US dollars.

How Gold Is Linked With the Dollar And What It Means For India?

India is the second largest buyer of gold in the world after China. The World Gold Council report for 2025 showed that India's gold consumption stood at 711 tons by 2025, following closely to China, whose gold consumption stood at 792 tons.

Majority of this gold is imported and every ounce is purchased in dollars. In FY26, India's gold import stood at $72 billion, a surge of 24% from the previous year. So here's what happened:

• FY26 Total Imports of India: $775 Billion
• Of this total, 4 Commodities Imports were at $240 Billion

Among these four commodities are crude oil with $134.7 billion in imports, followed by $72 billion in gold imports, $19.5 billion in vegetable oil imports and $14.5 billion in fertilizers.

Together, just these four commodities account for 30.96% of India's total imports. And gold alone accounts for 9.29% of the total imports, hence among major imported goods.

Recently, the IMF forecasted that India's current account deficit (CAD) could widen to $84.5 billion in 2026, which would be approximately 2% of the total GDP. When CAD widens, it means that India is spending more foreign currency on imports rather than earning via exports in overseas markets.

Although the US dollar is currently around the 98 mark and away from its record high of 102 levels, its exchange has increased sharply since the US-Israel-Iran war escalated in late February 2026. As per the latest data compiled by global financial messaging service Swift, or the Society for Worldwide Interbank Financial Telecommunication, the US dollar's portion of international transactions surged to 51.1% in March 2026, higher from 49.2% in the previous month. This is the highest since 2023.

Data from the World Gold Council revealed that Indian gold demand rose 10% yoy to 151 tons in Q1 and in value terms, the demand surged 99% yoy to a Q1 record of Rs 2,275 billion.

The WGC report said gold imports averaged 83 tons in the first two months of 2026, well above the 2025 monthly average of 53 tons, largely supported by strong investment demand during January. The late-February geopolitical developments in the Middle East and the related logistical disruptions to gold shipments from the UAE - a key gold import route for India—impacted bullion imports in March. Imports in Q1 at 186t were up 58% yoy.

However, RBI's gold reserves dropped in the latest fortnight ending on May 1, 2026, to $115.216 billion, which was down for second consecutive week.

Item	As on May 01, 2026 (₹ Cr.)	As on May 01, 2026 (US$ Mn.)	Week Variation (₹ Cr.)	Week Variation (US$ Mn.)
1. Total Reserves	65,56,404	6,90,693	-25,983	-7,794
1.1 Foreign Currency Assets #	52,38,072	5,51,825	11,464	-2,797
1.2 Gold	10,93,660	1,15,216	-39,415	-5,021
1.3 SDRs	1,78,350	18,789	1,433	15
1.4 Reserve Position in the IMF	46,321	4,863	536	8

What Happens If You Stop Buying Gold For 1 Year?

Prithviraj Kothari, President of India Bullion and Jewellers Association told GoodReturns that the impact will be psychological, not structural. India's 10-12 million annual weddings embed gold demand that is pre-committed and culturally non-negotiable - Akshaya Tritiya, Dhanteras, and wedding-season buying will not simply stop on a PM's appeal.

Here's a simple math problem: Let's say gold per troy ounce is at $4,600

At Rs 80 per dollar, India is paying Rs 368,000 for gold.

At Rs 95 per dollar, India is paying Rs 437,000 for the same gold per troy ounce.

Hence, even if gold prices are stable in the international market, a combination of a weak rupee and a stronger dollar eventually makes imports extremely costly.

Unlike crude oil imports, which are non-negotiable, gold is discretionary spending. So if thousands or millions of people stopped buying gold for a year, it would play a key role in reducing the import burden and further curbing the account deficit of the country.

Gold Outlook For India:

In Kothari's view, the PM's words, however, may nudge discretionary buyers toward lighter jewellery, digital gold, and ETFs - formats that don't trigger import demand. In FY26, India imported nearly $72 billion worth of gold - a record high. Global cues - Iran-US tensions, crude oil, and the dollar - will dominate price direction. The appeal is a signal of macro seriousness, not a market-moving policy lever.

Earlier, WGC's note said India's gold demand is likely to be anchored by investment interest, supported by price momentum, geopolitical risks, and subdued domestic financial markets. However, a rise in external risks and a potentially below-normal monsoon could weigh on growth and incomes, while inflationary pressures, partly driven by Middle East tensions, may dampen consumption, especially in price-sensitive segments. Amid these headwinds, investment demand is likely to remain firm, while jewelry demand may continue to face pressure, reinforcing the investment-led trend.