Gold Prices Drop After Customs Duty Cut
In a significant move during Budget 2024, Finance Minister Nirmala Sitharaman announced a substantial reduction in the customs duty on gold and silver, cutting it by 6%. This change has led to a surge in gold purchases as customers rush to jewelry stores to benefit from the lower gold prices.
Increased Demand Amid Falling Prices
The reduction in gold customs duty has created a buzz in India, the world’s second-largest gold market. Customers are flocking to jewelry stores to buy gold at the newly reduced rates. This has resulted in a noticeable increase in demand, particularly as the wedding season approaches. Many buyers are now opting for heavier gold jewelry pieces that were previously unaffordable due to high gold prices, which had reached a record high of Rs 74,000 per 10 grams.
Jewelry stores are experiencing a rise in daily demand, with some reporting an increase of up to 20% since the duty cut. To keep up with this surge, many jewelers have canceled their craftsmen’s leave, expecting continued high demand through the festive season. It’s worth noting that India imports nearly all of its gold for jewelry and bars.
Price Trends and Market Reactions
Since the announcement, gold prices have dropped significantly. On Tuesday, gold was priced at Rs 72,609 per 10 grams, but by Wednesday, it had decreased to Rs 69,194 per 10 grams—a decline of Rs 3,415 per 10 grams. This drop followed the government’s decision to reduce the customs duty on gold imports from 15% to 6%.
On the Multi Commodity Exchange (MCX), gold prices fell over 1.5% on Thursday, aligning with global bullion price trends. The MCX gold rate decreased by Rs 1,159, or 1.68%, to Rs 67,793 per 10 grams. Silver also saw a sharp decline, dropping more than 4% as traders awaited key economic data from the US.
International Gold Price Movements
Globally, gold prices have also been affected. Investors are taking profits ahead of anticipated US economic data, which could influence the Federal Reserve’s decisions on interest rates this year. According to Reuters, spot gold prices fell 0.9% to $2,377.29 per ounce, while US gold futures dropped 1.6% to $2,376.70.
Rahul Kalantri, VP of Commodities at Mehta Equities Ltd, noted, “We have observed sharp declines in gold and silver prices in Asian markets due to growing economic concerns in China. Nevertheless, potential Federal Reserve rate cuts in September could offer some support for gold prices.”
Jigar Trivedi, Senior Research Analyst at Reliance Securities, commented, “The 50% retracement level for gold is approximately Rs 65,800 per 10 grams, which currently serves as a significant support level. Although a pullback is possible, the overall outlook for gold remains weak.”
Despite these challenges, Trivedi anticipates that factors such as festive season buying, a weak dollar, uncertainty surrounding the US elections, and potential rate cuts by the US Federal Reserve may provide some short-term support for gold prices.
Gold Price Data:
| Date | Gold Price (Rs per 10 grams) | Change (Rs) | MCX Gold Price (Rs per 10 grams) | Change (%) | Spot Gold Price (USD per ounce) | US Gold Futures Price (USD per ounce) |
|---|---|---|---|---|---|---|
| Tuesday | 72,609 | – | – | – | – | – |
| Wednesday | 69,194 | -3,415 | – | – | – | – |
| Thursday | – | – | 67,793 | -1.68% | 2,377.29 | 2,376.70 |
This table summarizes the gold price trends and changes post the customs duty reduction.
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