Gold prices are likely to increase with the Union government considering an increase in import duty on the sought-after metal.

The increase in duty is part of the government’s strategy to curb gold imports, which is contributing to an increase in the current account deficit.

On Monday, the Reserve Bank of India pegged the current account deficit at 5.2 per cent of GDP for the second quarter of this fiscal.

Due to a combination of market factors, gold prices have been ballooning in recent years.

For instance, since August 2008, the prices have more than doubled.

“I may add that we may be left with no choice but to make it a little more expensive to import gold. This matter is under the government’s consideration,” Union Finance Minister P. Chidambaram said.

The measure has been endorsed by the RBI and the Prime Minister’s Economic Advisory Council.

Suppose gold imports had been half of the actual level, that would have meant India’s foreign exchange reserves would have increased by $10.5 billion, he said.

The import duty on gold was doubled — from 2 per cent to 4 per cent — in the Union budget for 2012-13. Following that increase, imports that had been shooting up in the previous years “moderated,” according to a report released by the RBI on Wednesday.

The government hopes that a further duty increase will curb gold imports more.