India gold prices 2% below pre-Budget level, says WGC
This story was originally published at 15:37 IST on 20 September 2024
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MUMBAI – Domestic gold prices are 2% lower than their levels before the full Budget for 2024-25 (Apr-Mar) on July 23, when the import duty on gold was cut to 6% from 15%, despite experiencing strong gains in August, World Gold Council Research Head India Kavita Chacko said in a report on Thursday.
Gold imports by India in August increased over three times from a month ago to $10.1 bln. "This surge can be attributed to the reduction in import duties announced towards the end of July and increased seasonal demand for gold ahead of the festive period," Chacko said.
"Following an initial surge in consumer demand (for jewellery and bars and coins) due to the sharp import duty cut, demand is reported to have since normalised. However, market reports indicate that overall buying momentum remains healthy, with an uptick compared to the period before the import duty reduction," she said.
Industry participants are closely monitoring the crucial festive and wedding season sales from August to December. Economic conditions in rural areas are expected to improve, which could lead to increased gold-buying interest, especially during the festive season, she said.
Indian gold exchange-traded funds have witnessed a surge in investor interest since the end of July. "The import duty cut and the changes to the long-term capital gains for gold ETFs announced in the Union Budget have been factors behind the increased inflows into gold ETFs," she said.
The total assets under management for Indian gold ETFs at the end of August were at 374 bln rupees, up 54% from a year ago, she said, citing reports by the Association of Mutual Funds in India. So far in 2024, net inflows into Indian gold ETFs have amounted to 61 bln rupees from 15 bln rupees in the corresponding period last year. "The steady inflow into Indian gold ETFs reflects a global trend of expanding investments in gold ETFs, driven by lower opportunity cost, strong gold price performance, and safe haven demand," Chacko said.
Besides cutting customs duty on gold, the Budget also cut the long-term capital gains tax to 12.5% from 20% without indexation benefits.
The Reserve Bank of India's demand for gold remains strong. The central bank acquired a total of 10.3 tn of gold over six weeks leading up to Sep 6, she said, citing data from the RBI. "Over the first eight months of the year, the RBI has purchased a total of 50 tn of gold, with acquisitions in each month. This accumulation significantly surpasses the net purchases of 2022 and 2023," she said.
The central bank's net gold purchase in 2022 was 33 tn and 16 tn in 2023. The RBI's gold reserves are now at 853.6 tn, accounting for 9% of its total foreign reserves, she said. End
US$1 = 83.52 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Ashutosh Pati
Edited by Saji George Titus
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