The general budget presented this week has brought a big change for those who invest in gold. Finance Minister Nirmala Sitharaman, acting on the old demand of jewelers, proposed to reduce the custom duty on gold and some other precious metals. This decision is having a two-way effect on people. On the one hand, those who were planning to buy gold have made a huge profit. However, on the other hand, those who had already invested in gold have suffered a loss.
The old demand of bullion traders was fulfilled
First of all, let’s talk about the budget. Finance Minister Nirmala Sitharaman presented the full budget for the financial year 2024-25 on Tuesday this week. This is the first budget of the third term of the Modi government. People had high expectations from this budget. Not everyone’s expectations were fulfilled, but an old demand of jewelers and bullion traders was definitely fulfilled in this budget. Bullion traders were demanding reduction in custom duty on gold and silver etc. The Finance Minister fulfilled their demand.
Such a huge reduction in custom duty
While presenting the budget, Finance Minister Nirmala Sitharaman announced to reduce the custom duty on gold to 6 percent. Till now the effective rate of custom duty on gold is 15 percent. That is, in the budget, the custom duty on gold has been reduced by a huge 9 percent. Similarly, the custom duty on silver has also been reduced from 15 percent to 6 percent. Apart from gold and silver, custom duty has also been reduced on platinum.
Gold became so cheap after the budget
The impact of this budget announcement has started showing immediately on the market. Gold prices on MCX are seeing a big fall for the third consecutive day today. In early trade on Thursday, gold was down by more than 1.5 percent on MCX and fell by Rs 1,159 to Rs 67,993 per 10 grams. On Tuesday, the day of the budget, gold fell by more than 5 percent.
There is scope for further fall in prices
Before the budget, gold was running above Rs 72,000 per 10 grams, which has now come down to Rs 68,000. That is, since the budget, gold has become cheaper by more than Rs 4,000 per 10 grams. The Indian Bullion and Jewelers Association says that the reduction in custom duty in the budget can have an impact of up to Rs 6,000 on gold prices. That is, now gold can become cheaper by Rs 2,000 per 10 grams.
The whole year’s margin was halved in 3 days
This reduction in the price of gold has created a great opportunity for potential buyers, while old investors have suffered losses. Many people in the country like to invest in gold. Before the budget, gold was continuously running near record highs and this year gold prices have already increased by 7-8 percent. That is, the margin of gold investors who had made a profit of 7-8 percent so far this year alone has now reduced to less than half. This has also affected the value of gold holdings with all investors.
Impact of budget on sovereign gold bond
For example, we can look at the investors of Sovereign Gold Bond. After the announcement of reduction in custom duty on gold in the budget, Sovereign Gold Bond has been affected and they are trading at a lower price. Sovereign Gold Bond prices on NSE are seeing a decline of up to 5 percent. The SGB August 2024 contract (SGB AUG24) has fallen more than 3 percent after the budget and is trading near Rs 7,275 per unit. Similarly, the SGB December contract (SGB DEC25) is near Rs 7,500 with a loss of about 6 percent.
Due to this, the price is expected to rise again
However, looking at the current market conditions, it seems that this loss of gold investors is temporary. Experts are expressing apprehension that even though the custom duty on gold has been reduced from 15% to 6%, the GST Council may increase the GST rate from 3% to 12%. In such a situation, the current softening in prices for the end user i.e. common customers may be cleared and the prices may again reach near the old level.
Also read: Changes in income tax slabs and rates, people earning up to Rs 3, 5, 7, 10, 15, 20 lakh will save this much tax
