To stabilize exchange rates and protect foreign reserves, Malaysia has followed India's lead by increasing import duties on gold. According to a Bloomberg report on the 26th citing traders, Malaysia has quietly imposed a 10% tariff on imports of certain gold bars since at least early May. The country had long maintained a zero-tariff policy on gold imports. This sudden policy shift has disrupted local gold trading.
The report indicates that some shipments have been detained by customs, while other cargo owners have rerouted their goods to different regions. As local gold prices have not risen correspondingly, the additional tax burden has rendered these import operations unprofitable.
Muamalat Bank, a local Malaysian bank offering gold investment products, issued a statement this week indicating that the 10% import tax cost on gold bars would be passed on to consumers. Data from Malaysia's Department of Statistics shows that in the first four months of this year, the country's non-monetary gold imports amounted to approximately 97 billion ringgit (about 166.36 billion yuan).
Malaysia's move closely mirrors recent actions by India. According to a report by The Economic Times, on May 13th, the Indian government significantly raised import duties on gold and silver from 6% to 15%, and on platinum from 6.4% to 15.4%. This measure aims to address pressures on the country's foreign exchange reserves and external debt account. The report suggests that higher import tariffs may reduce domestic demand in India, the world's second-largest consumer of precious metals. This could help narrow the trade deficit and support the rupee, which has been one of Asia's worst-performing currencies. Officials have warned that a sharp increase in import duties could lead to a resurgence of gold smuggling, which had notably decreased after India reduced tariffs in 2024.
Li Gang, Research Director at the China Foreign Exchange Investment Research Institute, noted that India is a core pricing force for international physical gold demand. Indian citizens have a deep-seated culture of gold savings, with gold heavily used in weddings, religious ceremonies, and wealth inheritance. The country's consistently large-scale gold imports mean its physical gold demand can influence Asian gold premiums, international gold flows, and seasonal gold market trends.
Li Gang pointed out that Malaysia's gold market is far smaller than India's. However, its role in Southeast Asian gold trade has been growing in recent years. Within the Asian gold circulation system encompassing Singapore, Malaysia, and Dubai, Malaysia functions as a regional transit hub, facilitates investment expansion, and handles gold refining and processing. Therefore, while Malaysia's new tax may have less impact than India's, it will still affect the efficiency of Southeast Asian gold trade and regional investment sentiment.
Industry experts view the successive imposition of gold import tariffs by these two countries as emergency measures in a broader battle to defend foreign reserves. Li Gang explained that, fundamentally, India and Malaysia's tariffs represent defensive management by emerging market economies of their foreign exchange reserves, capital flows, and currency stability amid the current global cycle of high interest rates and a strong US dollar.
Wind data shows that as of May 27th, the USD/INR exchange rate was 95.785, representing a cumulative depreciation of approximately 6.46% from the year's start at 89.975. The USD/MYR rate was around 3.96, a cumulative appreciation of about 2.19% from the year's start around 4.03.
"For non-gold-producing countries like India and Malaysia, where resident demand for purchasing gold is consistently strong, large-scale gold imports directly deplete dollar-denominated foreign reserves and increase pressure on the current account. Against the backdrop of a strong US dollar and high global financing costs, the more gold imported, the more pressure on the local currency's exchange rate," Li Gang stated.
Wang Hongying, President of the China (Hong Kong) Financial Derivatives Investment Research Institute, noted that the most direct short-term motivation for these tariffs is to reduce gold imports, stabilize trade deficits, retain more dollars domestically, prevent further currency depreciation, and thereby stabilize foreign exchange market conditions.
"Restricting gold inflows is not about being bearish on gold prices or preventing residents from buying at high prices and getting trapped. The fundamental reason is to restrict the outflow of US dollar foreign exchange reserves," Wang Hongying emphasized.
Li Gang believes that the sustained record highs in international gold prices over the past two years have also stimulated "safe-haven panic buying" among residents in emerging market countries. For these governments, a significant shift of resident funds from bank deposits, bonds, and even consumption into gold weakens domestic financial system liquidity, affecting credit expansion and economic growth. Therefore, raising import tariffs can both increase fiscal revenue and curb short-term speculative demand, slowing the pace of gold imports.
In Li Gang's view, as many emerging markets strive to stabilize their currencies, excessive gold buying by residents essentially equates to "private de-monetization" of the local currency, a trend governments do not wish to see spread too rapidly. This round of gold tariffs should be seen more as a macro capital management tool than a traditional trade protection policy.
A recent report from the World Gold Council, cited by The Economic Times on May 22nd, predicts that due to the significant tariff hike, India's combined demand for jewelry, bars, and coins in 2026 will decrease by approximately 50 to 60 tons, a reduction of about 10% compared to the previous year.
Gold price volatility has intensified this year. On May 27th, the spot gold price briefly fell below the $4,500 per ounce mark, nearly 20% down from the year's high of $5,598.75 per ounce.
In Li Gang's assessment, the gold tariff adjustments by India and Malaysia will have a very limited overall impact on international gold prices. The current logic driving gold pricing no longer hinges on Asian retail buying. The real drivers are central bank purchases, Federal Reserve interest rates, US dollar credit risk, and geopolitical conflicts.
Looking ahead, Wang Hongying pointed out that gold faces short-term technical adjustments, primarily due to high US inflation potentially leading the Fed to pause or even reverse rate cuts, coupled with the fact that substantial gold imports deplete the limited dollar reserves of some countries, impacting their exchange rates. In the medium to long term, with persistent US fiscal deficits, central banks will continue to increase gold holdings to hedge against US dollar credit risk.
Li Gang concluded that gold tariffs are a short-term regulatory measure for emerging markets. However, if the official share of gold in reserves continues to rise, the long-term logic of de-dollarization remains intact.
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