Gold and Silver Prices Drop as Customs Duties Slashed in Budget 2024

Significant Reduction in Customs Duties

In a move to enhance domestic value addition and stimulate the gems and jewellery industry, Finance Minister Nirmala Sitharaman announced a substantial cut in customs duties on gold and silver in the Union Budget 2024. The customs duty on gold and silver has been reduced to 6%, while the duty on platinum has been cut to 6.4%.

Impact on Gold and Silver Prices

The reduction in customs duty has led to an immediate decrease in gold and silver prices. On the Multi Commodity Exchange (MCX), gold prices fell by over Rs 2000 to Rs 70,350, and silver prices dropped by Rs 2500 to Rs 86,600. This price adjustment reflects the reduced import duty, which now stands at 11% from the previous 15%, considering the unchanged 5% Agriculture Infrastructure and Development Cess (AIDC).

Industry Response

Jateen Trivedi, VP Research Analyst at LKP Securities, noted that the market has reacted positively to the lower import duty, leading to a decrease in gold and silver prices. Mahendra Luniya, Chairman and Founder of Vignaharta Gold, emphasized that this reduction could significantly boost consumer demand, benefiting companies through increased sales volumes and improved profit margins. Amit Goel, Co-founder and Chief Global Strategist at Pace 360, echoed these sentiments, highlighting the potential for higher revenues and better profit margins.

Surge in Jewellery Stocks

Following the announcement, shares of jewellery retailers surged. Senco Gold's stock rose by 6.16%, Rajesh Exports by 5.49%, and PC Jeweller by 5%. Titan Company, Tribhovandas Bhimhji Zaveri, and Kalyan Jewellers India also saw notable gains. However, the broader BSE Sensex benchmark dropped by 996.53 points.

Price Trends and Market Reactions

The reduction in customs duty has had a significant impact on gold prices across different carat levels. For instance, 22k gold prices dropped by Rs 250 to Rs 67,450 per 10 grams, while 24k gold prices fell by Rs 270 to Rs 73,580 per 10 grams. Silver prices also declined, with 1 kg of silver now costing Rs 91,100, down by Rs 400.

Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited, praised the government's decision, noting that the 9% cut in customs duties was more than the market's expected 5% cut. Saiyam Mehra, Chairman of the All India Gem & Jewellery Domestic Council, and Rajesh Rokde, Vice Chairman of the same council, highlighted the positive impact on domestic jewellery manufacturers and consumers, expecting increased household investments and savings.

Broader Economic Implications

The Finance Minister's announcement also included exemptions on customs duties for 25 critical minerals, including lithium, copper, and cobalt. These measures aim to support various sectors and encourage economic growth. Additionally, the extension of working capital loans for SMEs and MSMEs in the jewellery sector is expected to provide a significant boost to these enterprises.

Conclusion

The reduction in customs duties on gold, silver, and platinum in Budget 2024 is a strategic move to boost the domestic gems and jewellery industry. The immediate drop in prices is expected to stimulate consumer demand, benefiting both the industry and the broader economy. The government's measures reflect a commitment to supporting economic growth and enhancing value addition in the country.