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Discount on domestic gold price wiped out post duty cut
This story was originally published at 17:26 IST on 24 July 2024
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By Sandeep Sinha
MUMBAI – The discount on the landed price of gold in domestic markets was wiped out today after the government slashed the basic customs duty on the yellow metal in the Budget for 2024-25 (Apr-Mar) presented on Tuesday. Finance Minister Nirmala Sitharaman announced on Tuesday that the basic customs duty on gold and silver will now be at 6% from 15% earlier.
The announcement led to a sharp fall in gold prices in the country, which forced dealers to reduce discounts on the landed price of gold. "In the coming days, gold is likely to command a premium over international prices", Kumar Jain, owner of Umedmal Tilokchand Zaveri said. Jain expects increased footfall in the coming days as buyers have been waiting for a correction in prices to resume purchases.
The retail jewellery and gold demand has dried up in the last 10–15 days on the expectation of a duty cut in the Budget as prices hovered near record-highs in the domestic market. The precious metal prices touched a fresh record high of 74,538 rupees per 10 gm on Jul 18. On Tuesday, the MCX August contract settled at 68,510 rupees per 10 gm, down 5.8% from Monday.
"The legitimate imports of gold will now move up and smuggling will be severely discouraged because the duty rationalisation has taken place. This is very positive and will gradually lead to robust demand and a premium on the landed price," Kunal Shah, head of commodity research at Nirmal Bang said.
On Jul 17, the discounts on gold in the country reached an all-time high of $110.3 per ounce, according to World Gold Council data. Bullion prices are determined by local demand and supply dynamics, as well as any local regulations which might affect that dynamic. In India, some of the factors which contribute to a premium/discount to the international gold price are dollar/rupee exchange rate, local taxes, import restrictions and seasonal factors, it said. End
US$1 = 83.72 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Saji George Titus
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