Gold Prices Drop 5% after Custom Duty Reduction in Budget 2024!

In a significant move aimed at boosting the economy and encouraging consumer spending, the government announced a reduction in custom duties on gold in the Budget 2024. This decision has led to an immediate drop in gold prices, bringing relief to buyers and traders alike.

The Finance Minister, in her budget speech, declared a reduction in the custom duty on gold and silver from 15% to 6%. This substantial cut is part of a broader strategy to make gold more affordable for consumers and to curb illegal imports. The decision is also expected to positively impact the jewelry industry, which has been grappling with high raw material costs.

Following the announcement, gold prices saw a significant decline. The price of 10 grams of 24-carat gold fell from ₹73,218 (22 July) to ₹69,602 (23 July), marking a drop of ₹3,616 i.e. over 5%. This reduction is likely to spur demand, especially among retail buyers who had been deterred by the high prices. Today’s (25 July) gold price is ₹69,151!

Market analysts predict that the lowered duties will lead to increased gold imports, benefiting the overall economy. The move is also expected to reduce the disparity between the official and unofficial gold markets, thereby boosting legal trade channels.

The jewelry industry has welcomed the duty reduction. "This is a much-needed relief for the industry. Lower gold prices will help us offer more competitive prices to our customers, boosting sales and overall business," said Rajesh Mehta, Chairman of Rajesh Exports.

Smaller jewelers and artisans, who rely heavily on affordable raw materials, are also expected to benefit. The reduction in costs could lead to an increase in production and job creation within the sector.

Consumers have reacted positively to the news, with many rushing to take advantage of the lower prices. "I've been waiting for gold prices to drop so I can buy jewelry for my daughter's wedding. This reduction in duty is perfect timing for us," said Sunita Sharma, a resident of Delhi.

The wedding season, traditionally a peak time for gold purchases in India, is likely to see a surge in demand. Retailers are preparing for increased footfall and higher sales volumes in the coming months.

Economists believe the duty reduction could have several long-term benefits. By making gold more accessible, the government aims to increase consumer spending, which is crucial for economic growth. Additionally, the move is expected to bolster the formal gold market, reducing the prevalence of smuggling and black-market transactions.

However, some experts caution that the increased demand could lead to a higher import bill, potentially affecting the trade balance. The government will need to monitor the situation closely to manage any adverse effects on the economy.

The reduction in custom duties on gold announced in Budget 2024 has already had a significant impact on the market, with prices dropping and demand increasing. This strategic move by the government is expected to benefit consumers, the jewelry industry, and the overall economy, provided the increased demand does not adversely impact the trade balance. As the market adjusts to these changes, stakeholders across the board are hopeful for a more vibrant and thriving gold sector.