Gold Prices Plunge After Shocking Customs Duty Cut

Gold prices in India took a nosedive recently, dropping dramatically after the announcement of a surprise cut in customs duty by Finance Minister Nirmala Sitharaman.

This move led to gold prices plummeting more than five percent in a single day, erasing around Rs 10.7 lakh crore in market value. The decline is noted as the sixth largest wealth erosion in the history of the Indian market.

According to Jateen Trivedi, a Vice President and Research Analyst at LKP Securities, the gold market faced a major setback due to falling prices in the Comex market, where gold slipped below $2,375.

As of July 23, 2024, gold on the Multi Commodity Exchange (MCX) dropped to a three-month low of Rs 67,700, down from a high of Rs 74,700 just a week earlier.

One of the critical factors leading to this decline was the customs duty cut, which triggered a steep price drop that day. Additionally, Comex gold prices have been experiencing a consistent decline, a shift attributed to a rush for safer investments like the Japanese yen amid global market instability.

Trivedi suggests that now might be a strategic time to invest in gold and silver, hoping for future gains as investors anticipate changes in U.S. interest rates potentially benefitting precious metals.

He advises considering lump sum purchases now, as future GST implementations could drive prices higher.

Adhil Shetty, the CEO of BankBazaar.com, emphasizes the importance of aligning investment decisions with personal financial goals. As prices trend lower, it could be a good time to invest in these metals, but sentiment alone shouldn’t guide decisions.

For those looking to invest in gold, options like Sovereign Gold Bonds (SGBs) and gold ETFs are worth exploring. With upcoming festive seasons expected to drive prices up, the revised tax treatment on gold ETFs has also impacted how returns are calculated.

Lastly, market analysts note that for gold to hit or surpass its all-time highs, a mix of favorable global economic conditions and changes in local prices after customs duty adjustments is necessary.