Gold prices fell by more than five percent after Finance Minister Nirmala Sitharaman announced a steep cut in import duty on gold and silver.
At 5 pm, gold prices on the MCX platform were down 5.03 percent or Rs 3,657 at Rs 69,061 per 10 grams amid speculations of increase in gold imports following the duty revision. After the duty cut, silver prices fell by 4.38 percent to Rs 85,299 per kg.
The FM announced reduction in customs duty on gold and silver to 6 percent from the existing 15 percent and on platinum to 6.4 percent from 15.4 percent. There is a possibility of increase in gold imports in the country due to duty reduction. In FY 2023-24, the gold import bill stood at Rs 3.77 lakh crore, leading to an outflow of an equivalent amount in dollars.
Harish V, head of commodities, Geojit Financial Services, said, “Cut in customs duty on gold may bring down domestic prices and perhaps increase demand. The current duty on gold and silver is 15 percent which includes 10 percent basic customs duty and 5 percent agriculture infrastructure development cess.
“The broader outlook remains volatile and weak as COMEX gold remains below $2415. Interest rate cuts in the US will be keenly anticipated, now that Indian gold has been discounted, presenting a more favorable long-term buying opportunity for gold in the Indian markets,” Jatin Trivedi, VP Research Analyst – Commodity. And currency, LKP Securities said. ,
Gold loan companies reacted sharply on the stock exchanges. Muthoot Finance fell 4.25 percent and Manappuram Finance fell 5.62 percent.
Ahead of the interim budget in February, the government had increased the duty on gold and silver imports to 15 percent from the then existing 10 percent.
Further, the Budget said that with the rationalization of the rate to 12.5 percent, it is proposed to remove the indexation available under the second provision of section 48 for computing any long-term capital gains currently accrued on property, gold and other Available for unlisted assets.
According to the World Gold Council (WGC), gold demand in India witnessed a significant increment of 8 percent to 136.6 tonnes in the January-March quarter of calendar year 2024. Prices are reaching historic highs. The Reserve Bank of India (RBI) bought more than 19 tonnes of gold during the first quarter of the current calendar year 2024.
