Informist, Tuesday, Sep 24, 2024

By Sandeep Sinha

MUMBAI – The jewellery industry, which was staring at a loss of 180 bln rupees after the government cut import duty on gold, has fully recovered from the shock, market sources said. The industry was helped out of its precarious position by last week's interest rate cut by the US Federal Reserve and the rise in geopolitical tensions in West Asia, both of which boosted safe haven demand for the yellow metal, taking its price to a new lifetime high.

Finance Minister Nirmala Sitharaman, in her Budget for 2024-25 (Apr-Mar) announced on Jul 23, reduced the import duty on gold and silver to 6% from 15%, causing a sharp fall in prices of the yellow metal. As a result, the jewellery industry, which was sitting on a huge stock of gold acquired at higher rates, faced a massive potential loss.

The average loss per kg for dealers, wholesalers, and big and small jewellers, who had bought the precious metal at the higher duty of 15%, came to about 590,000 rupees per kg, Surendra Mehta, national secretary, India Bullion and Jewellers Association, said. Given that the industry was sitting on inventory of 300 tn, the cumulative loss worked out to about 180 bln rupees, he said. The loss per 10 gm was 5,900 rupees.

"Jewellers bought gold at lower prices to compensate for the losses suffered on account of the customs duty cut in the Budget and have since recovered their losses with the rise in gold prices," Kumar Jain, owner of Umedmal Tilokchand Zaveri, told Informist. The inventory buying has paid off with the sharp rise in gold prices in the domestic and international markets, Jain said.

Ajay Kedia, director, Kedia Advisory, agreed. He said that despite the sharp fall in gold prices witnessed after the finance minister announced a cut in import duty, the potential losses have been fully recouped and prices are moving towards new highs. He said this was consistent with the past behaviour of Indian buyers, who "never fail to buy at a correction". With the festival season upon us, "fundamentals have become supportive, which is why we are seeing gains in gold prices", he said.

The price of gold on the Multi Commodity Exchange of India has risen by 10.7%, or 7,237 rupees, from the low of 67,400 rupees per 10 gm touched on Jul 27. On Jul 17, the yellow metal touched a lifetime high of 74,731 rupees per 10 gm. At 74,457 rupees per 10 gm, it is now less than 50 basis points away from scaling a fresh high on the MCX. The yellow metal today hit a new lifetime high of $2,664.60 per oz on COMEX. End

US$1 = 83.67 rupees

Edited by Rajeev Pai

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