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Gold Prices Crash by Rs 3,350 After Govt Cuts Duty

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By Rediff Money Desk, New Delhi   Jul 23, 2024 19:08

Gold prices in India plummeted by Rs 3,350 per 10 grams after the government reduced customs duty on gold and silver to 6%. Silver prices also nosedived by Rs 3,500.
Gold Prices Crash by Rs 3,350 After Govt Cuts Duty
Photograph: Kind courtesy anomalnaya/Pixabay
New Delhi, Jul 23 (PTI) Gold prices tumbled by Rs 3,350 to Rs 72,300 per 10 grams in the local market here on Tuesday amid subdued demand by jewellers after the government announced the customs duty cut on the yellow metal and silver to 6 per cent.

According to the All India Sarafa Association, silver prices also nosedived by Rs 3,500 or 4 per cent to Rs 87,500 per kg. In the previous session, it had closed at Rs 91,000 per kg.

The precious metal rates dropped by Rs 3,350 or 4.6 per cent to Rs 72,300 per 10 grams. On Monday, the precious metal rates had closed at Rs 75,650 per 10 grams.

In addition, gold of 99.5 per cent purity plummeted by Rs 3,350 to Rs 71,950 per 10 grams. It had settled at Rs 75,300 per 10 grams in the previous session.

Traders attributed the decline in gold prices after the government slashed customs duties on a range of products, including gold and silver, to cut input costs, increase value addition, promote export competitiveness and boost domestic manufacturing.

Silver declined by Rs 6,900 in the past five sessions since July 18, when it had fallen by Rs 400 to end at Rs 94,000 per kg.

On the Multi Commodity Exchange (MCX), gold futures plunged Rs 3,860 or 5.31 per cent to trade at Rs 68,858 per 10 grams.

The most traded August contract hit a four-month low of Rs 68,500 per 10 grams on the MCX.

Further, silver contracts for September delivery were quoted lower by Rs 4,018 or 4.5 per cent to Rs 85,185 per kg on the exchange.

"In the budget, the FM announced a reduction on basic customs duty on gold and silver from 10 per cent to 6 per cent. Adding 5 per cent AIDC (Agriculture Infrastructure and Development Cess), which remains unchanged, the total import duty on gold and silver is reduced from 15 per cent to 11 per cent now.

"As a result, the price of gold reacted lower in MCX as the market prices in the lower import duty gap of 4 per cent," Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities, said.

According to Anindya Banerjee, SVP - Head of Research of Currency, Commodity & Interest Rates at Kotak Securities, MCX gold and silver prices faced significant selling pressure following a reduction in basic customs duty from 10 per cent to 5 per cent, and a decrease in AIDC from 5 per cent to 1 per cent, resulting in a total import duty of 6 per cent.

This move has led to a sharp decline in prices, Banerjee added.

On Tuesday, Finance Minister Nirmala Sitharaman also said securities transaction tax (STT) will be increased on futures and options (F&O) trade from October 1 to discourage retail investors from investing in the risky instrument.

The measure was to allay concerns about hyperactive interest in the F&O segment.

In the international markets, Comex gold was trading at USD 2,459.20 per ounce, up by USD 17.10 per ounce against the previous close.

Globally, gold remained stable due to mixed fundamentals, while traders awaited further cues on the US macro front before placing fresh bets, Saumil Gandhi, Senior Analyst of Commodities at HDFC Securities, said.

However, silver was trading flat at USD 29.31 per ounce in New York.

According to commodity market experts, gold prices increased on Tuesday, driven by a decline in US dollar and Treasury yields as traders awaited upcoming US economic data and Federal Reserve comments for clues on interest rate cuts.

"The market is eyeing US GDP data on Thursday and Personal Consumption Expenditures (PCE) price index data on Friday. Traders are anticipating a rate cut by Fed in September, which would lower the opportunity cost of holding non-yielding bullion.

"Last week, gold prices reached an all-time high on increased expectations of U.S. interest rate cuts," Prathamesh Mallya, DVP- Research, Non-Agri Commodities and Currencies at Angel One, said.

In the budget 2024-25 on Tuesday, the government slashed customs duties on a range of products, including gold and silver.

The basic customs duty on coins of precious metals, gold/silver findings, and gold and silver bars was reduced to 6 per cent from 15 per cent. It was cut to 5.35 per cent from 14.35 per cent for gold and silver dore.
Source: PTI
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