Finance Minister Nirmala Sitharaman's announcement to cut customs duties on gold and silver has resulted in a notable drop in prices, providing significant relief to consumers. In her Budget 2024 speech, she declared the reduction of the import duty on these precious metals from 15% to 6%, a move expected to stimulate market demand.
The revised customs duty structure involves reducing the Basic Customs Duty (BCD) from 10% to 5% and the Agricultural Infrastructure Development Cess (AIDC) from 5% to 1%. This considerable cut aims to make gold and silver more affordable, potentially boosting consumer purchases and market activity.
Experts in the commodities market have welcomed this decision. Hareesh V, Head of Commodities at Geojit Financial Services, noted that the reduction in customs duty could lead to lower domestic prices and increased demand. He explained that the previous duty structure, which included a 10% BCD and 5% AIDC, was significantly higher compared to the new rates.
Following the announcement, gold prices on the Multi Commodity Exchange (MCX) experienced a substantial decline. Prices fell from Rs 72,838 to Rs 68,500 per 10 grams, a decrease of Rs 4,000.
Similarly, international gold prices reflected this trend, hovering around $2,397.13 per ounce. Silver prices on the MCX also dropped sharply, from Rs 88,995 to Rs 84,275 per kilogram.
Sachin Kothari, Director at Augmont - Gold For All, described the reduction in customs duty as a positive development for the bullion industry. He emphasised that the cut from 15% to 6% exceeded expectations and would likely lead to an increase in physical gold demand. Kothari projected that MCX Gold prices, which dropped from Rs 73,000 to Rs 69,000, could further fall to around Rs 67,000 per 10 grams.
Mahendra Luniya, Chairman of Vighnaharta Gold Ltd, also highlighted the immediate impact of the duty reduction on the market. He pointed out that while the move is beneficial for investors, ongoing geopolitical tensions, such as those involving China, could still influence gold prices.
For consumers, the reduction presents a timely opportunity to invest in gold, particularly through digital options like Sovereign Gold Bonds, which offer lower purchase costs and a 2.5% annual interest rate.
The reduction in customs duty on gold and silver is expected to have a broad positive impact. Lower prices are anticipated to drive higher consumer spending, benefiting both individual buyers and the bullion industry as a whole. This move is particularly significant in a market where affordability can significantly influence purchasing decisions.
Despite the positive outlook, market analysts caution that broader economic and geopolitical factors will continue to play a crucial role in shaping the future trends of gold and silver prices.
The immediate impact of the duty reduction, however, is clear: consumers now have an advantageous window to invest in gold and silver at more affordable rates, potentially leading to increased market activity and demand.
The significant reduction in customs duties on gold and silver as part of the Budget 2024 is a strategic move aimed at making these precious metals more accessible to consumers.
By lowering the costs associated with purchasing gold and silver, the government hopes to boost demand and support the overall growth of the bullion market. While broader market conditions and global events will continue to influence prices, the current reduction presents a clear benefit for consumers and investors alike.
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