(Mike Maharrey, Money Metals News Service) Malaysia has joined India in hiking its import duty on gold.
Traders and dealers in the Southeast Asian nation said officials have already started charging a 10 percent levy on certain gold bar shipments into the country. The move has reportedly disrupted bullion trade in the regional market.
According to reporting by Kitco News, the tariff officially goes into effect on June 8.
Earlier this month, the Indian government hiked the import duty on precious metals from 6 percent to 15 percent in an attempt to moderate the country’s trade deficit and support the rupee.
With both gold and oil prices spiking, India’s import bill exploded, putting significant downward pressure on the rupee. The tax hike is intended to discourage imports to narrow that trade deficit.
Analysts at the World Gold Council said higher Indian import taxes have had a limited impact on the market in the past.
It remains unclear what motivated the tax hike in Malaysia, as officials have not provided much information. According to Bloomberg, a Royal Malaysian Customs Department spokesperson said that the Ministry of Finance will be “engaging with the industry” regarding the imports of “minted gold products.”
Many analysts believe Malaysian officials made the move for similar reasons as Indian policymakers, as many countries try to manage their currencies and trade deficits in a period of rapidly rising oil prices.
There is also speculation that government officials want to exert tighter control over the gold market as demand has exploded over the last year. Bloomberg reported, “In Malaysia, some local banks have introduced gold investment products over the past year, and Loomis AB, a bullion logistics company, opened a vault near the country’s capital to cater to the growing demand.”
The tax appears to be limited to gold bars meeting LBMA standards. These are primarily used by banks, institutions, and bullion dealers. This would effectively create a two-tiered gold import policy, with investment-grade bars taxed while lower-quality bars and jewelry remain exempt.
In practice, Banks offering LBMA-standard gold bars will be required to add the entire tax to the cost, widening the spread between local and spot prices in the country.
According to Bloomberg, the tax has already disrupted the Southeast Asian gold market.
“Some shipments were held at customs or have been diverted elsewhere as the extra cost — without a comparable rise in local gold prices — would make the imports unprofitable, some of the people said.”
Analysts say higher import duties could have spillover effects into the broader gold market. Juris Hour senior editor Mariya Paliwala said she’s keeping an eye on ETF premiums, particularly in India’s silver market.
“These premiums represent the additional amount investors pay above the underlying net asset value (NAV) of the assets held by the fund. Restrictions on silver imports have generated concerns that supply channels could tighten if demand rises sharply. Such circumstances may create distortions between physical availability and ETF pricing.”
Taxes on gold and silver are particularly pernicious because they are essentially taxing money. In effect, India and Malaysia appear to be trying to raise the price of good money to protect their rapidly devaluing fiat currency.
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
