Gold prices drop by Rs 4,000 in a single day, posing challenges for smugglers

Prices of gold and silver in the domestic market took a nosedive on Tuesday following the finance minister’s proposal to slash import duty on these precious metals from 15% to 6%. This significant reduction in import duty is expected to make it cheaper to bring these metals into the country, potentially leading to an increase in the supply through the import channel. Market experts anticipate that this surge in supply could result in a rapid drop in prices, subsequently driving up the demand for jewellery in the domestic market.

Impact on Prices in the Bullion Market

In Mumbai’s bullion market, the repercussions of the duty cut were immediately evident, with the price of gold plummeting to Rs 69,100 per 10 grams from Rs 72,750 the previous day. This decrease of nearly Rs 4,000, approximately 5%, signals a notable shift in the market. Similarly, the price of silver also witnessed a decline, trading at Rs 85,400 per kg compared to Rs 88,300 on the previous day, marking a drop of about Rs 3,000 or 3%. The downward spiral in prices was also reflected in the MCX prices for these metals.

Insight into the Impact of Duty Reduction

Vipul Shah, the chairman of the Gem & Jewellery Export Promotion Council, emphasized that the finance minister’s proposal to lower custom duties on gold and silver is expected to enhance domestic value addition in jewellery manufacturing. This move is likely to unlock funds amounting to nearly Rs 1,000 crore that were previously tied up in duty payments, ultimately boosting the working capital of jewellers across the country.

Additional Insight:

The reduction in duty not only affects the domestic market but also has implications for the international market. With cheaper imports of gold and silver, India may see an increase in exports of jewellery made from these metals. This could lead to a boost in the country’s jewellery export industry, contributing to overall economic growth and trade balance.

Overall, the duty cut presents a lucrative opportunity for jewellers and consumers alike, driving changes in pricing dynamics and potentially restructuring the supply chain for precious metals in the country.