Following the announcement of India’s Budget 2024, gold prices have experienced a significant decline due to a substantial reduction in customs duties. The government cut the basic customs duty on gold and silver from 15% to 6%, a move that has led to a steep drop in market prices.
Immediate Impact on Gold Prices
In the wake of the budget announcement by Finance Minister Nirmala Sitharaman, gold prices plummeted by ₹3,350 to ₹72,300 per 10 grams in the national capital on July 23. This downward trend continued, with prices falling further by ₹650 the next day and another ₹1,000 on July 25, ultimately settling at ₹70,650 per 10 grams. Overall, this represents a 7.1% decrease, or ₹5,000, in just three trading sessions following the duty cut.
Market Reactions and Predictions
Experts have noted that the reduction in customs duties is expected to make gold more affordable, thereby boosting retail demand. Sachin Kothari, Director of Augmont, stated that consumers could purchase gold at approximately 9% less than previous rates, which is likely to stimulate physical demand significantly. Rahul Kalantri from Mehta Equities predicted that prices might further decrease to around ₹67,000 per 10 grams as the market adjusts to the new duty structure.
The cut in duties is also anticipated to curb gold smuggling, as lower legal import costs make legitimate channels more attractive. This shift could enhance the organized jewellery sector, benefiting suppliers and retailers alike. Jateen Trivedi from LKP Securities emphasized that the new pricing structure could encourage more investments in gold, both as a commodity and a financial asset, particularly as it is often viewed as a hedge against inflation and currency devaluation.
Broader Implications for the Jewellery Sector
The customs duty reduction is expected to have a ripple effect throughout the jewellery market. With lower gold prices, there is an anticipated increase in demand for gold jewellery, which could provide a significant boost ahead of the festive season. Retailers are likely to respond by offering more competitive prices and innovative designs, further stimulating consumer interest.
Colin Shah, Managing Director of Kama Jewelry, highlighted the potential for increased exports of Indian gold and silver products due to enhanced competitiveness in international markets. This could open up new opportunities for growth within the sector.
The recent cuts in customs duties on gold and silver have led to a notable decrease in gold prices, creating a more favorable environment for consumers and investors alike. As the market adjusts, the long-term effects will depend on various factors, including international market trends and domestic demand. The jewellery sector stands to benefit significantly from this policy change, potentially revitalizing consumer interest and boosting sales in the coming months.
