Import duty

India raises import duty on gold to support rupee

After hike in import duty on gold from 7.50 per cent to 12.50 per cent, gold price witnessed sharp upside move on Multi Commodity Exchange (MCX) and in retail domestic markets. Recording ₹1,433 per 10 gm gain on Friday session, MCX gold rate ended at ₹51,950 levels whereas spot gold price ended $2.81 per ounce higher at $1810.10 per ounce. So, the precious metal ended higher in domestic market this week while it retraced in the spot market in this period. In fact, gold price has logged 6.74 per cent dip in Q1FY23.

According to bullion experts, gold price is holding well over the key support of ₹50,600 on MCX and $1770 in spot market. These support levels in the respective markets are intact, every dip should be seen as buying opportunity by precious metal investors.

Import Duty

On immediate short term reason for gold price rally, Sugandha Sachdeva, Vice President — Commodity & Currency Research at Religare Broking Ltd said, “Gold prices remained trapped in a range this week, wherein there was a divergence in domestic and international gold prices

. The precious metal witnessed a decline in the international markets, while it gained significantly in the domestic markets amid rupee depreciation towards record lows and a surprise move by the government to raise import duty on gold by 5 per cent. Rising gold imports are causing a strain on the CAD and pushing the Indian rupee on a downwards trajectory.

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So, in an attempt to curb the rising gold imports and bring down the trade deficit, the government has hiked the import duty on gold, which will make it expensive and likely dampen domestic demand.”

Asked about gold price outlook, the Religare expert said, “Looking ahead, the price outlook for gold is shaky in the short term as the tightening of global financial conditions is restricting the upside in the precious metal while looming recession risks are propelling safe-haven demand for gold on the other hand.

Besides, energy and other commodity prices have drifted lower during the week, easing inflation expectations to a certain extent and giving a sense that the worst may be over for the rising inflation trajectory.

In terms of key data, the US economy contracted at an annualized rate of 1.6 per cent in the first quarter, after growing at a 6.9 per cent pace in the fourth quarter of 2021 adding to fears about recession, while underpinning gold prices to a large extent.”

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