Union Budget 2019: The Budget Proposal to hike customs duty on gold and different valuable metals from 10% to 12.5% came as a surprise to the bullion business and will prompt a further ascent in gold costs. Stocks of jewelry companies finished with losses on Friday.
Union Budget 2019: Gold Rates To Hike 10% to 12.5%
Navneet Damani, vice president, Commodity and Currency Research at Motilal Oswal Financial Services, said, “Markets were expecting cut in customs duty, but the hike came as a surprise. Fiscal deficit is one of the reasons why there has been no cut in custom duty for the past few years.”
However, he included that gold is entering a bullish space and is as of now up this year and another 15-20% rally is expected in the following 12-year and a half because of factors such as geopolitical pressures and desires for financing cost climb by the US Fed.
The gold spot cost on MCX is ‘34,570 for 10 gm of gold. Since January, gold costs have flooded by 9.6%. Market members state the climb in customs duty will push up gold costs by ‘750 for 10 gm. Supplies of Titan, PC Jeweler. and Tribhovandas Bhimji Zaveri was down in the scope of 1-5% on Friday.
Chirag Mehta, senior fund manager -Alternative Investments, Quantum Mutual Fund, said: “Customs duty has become a major revenue-earner for the country and the dream of making India the gold-trading capital has been sacrificed for the sole purpose of filling the government coffers in a bid to reduce the deficit.”
As indicated by him, further increment in customs duty will just misshape showcases as the present differential between gold costs in India and the worldwide gold cost will extend by 2.5%-15.5%.
“This is a significant differential and may augur well for illicit gold imports. Such interventionist policy making ensures that India will never be at the centre of the global gold market despite been the largest consumer and will continue to remain a price taker,” he said.
“Spot gold in the international market held steady near $1415 an ounce as investors stayed away from taking fresh bets ahead of the key US employment data scheduled later in the day. There are expectations that the job data would offer more cues on the Fed’s stance on interest rate cut,” said Hareesh V, head – commodity research, Geojit Financial Services. “At the same time, domestic gold futures rallied by more than 2% due to the hike in customs duty announced in the Union Budget.”