Following Finance Minister Nirmala Sitharaman’s announcement of a reduction in gold customs duty during Budget 2024, customers have rushed to jewellery stores to take advantage of lower gold prices.
This has led to a notable increase in demand for gold, particularly as the wedding season approaches. Since the duty cut, customers in India, the world’s second-largest gold market, have flocked to jewellery stores to buy gold at reduced rates. Many are opting for heavier pieces of jewellery that were previously out of reach when gold prices hit a record high of Rs 74,000 per 10 grams.
Jewellers have reported a rise in daily demand, with some experiencing a surge of up to 20% since the duty reduction. To meet this increased demand, jewellers have cancelled their craftsmen’s leave, anticipating that the high demand will continue through the festive season. India imports nearly all the gold it uses for jewellery and bars.
Following the budget announcement, gold prices have dropped from Rs 72,609 per 10 grams on Tuesday to Rs 69,194 per 10 grams on Wednesday. This Rs 3,415 per 10 grams drop came after the government reduced the customs duty on gold imports from 15% to 6%.
On the Multi Commodity Exchange (MCX), gold prices declined over 1.5% on Thursday, in line with international bullion price trends. The MCX gold rate fell by Rs 1,159, or 1.68%, to Rs 67,793 per 10 grams. Silver prices also dropped sharply, falling more than 4% as traders awaited key economic data from the US.
Internationally, gold prices fell as investors took profits ahead of anticipated US economic data, which could indicate when the Federal Reserve might cut 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, said, “We have seen sharp declines in gold and silver prices in Asian markets due to increased economic concerns in China. However, potential Federal Reserve rate cuts in September could offer some support for prices.”
Jigar Trivedi, Senior Research Analyst at Reliance Securities, said, “The 50% retracement level for gold is around Rs 65,800 per 10 grams, which is a major support level for now. After a period of consolidation, gold prices made a decisive move in July. While a pullback is possible, the overall outlook appears weak.”
Despite these challenges, Trivedi believes that the 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.