Gold and Silver Prices: Adjustment in Import Duties

The Indian government’s recent decision to raise import duties on gold and silver findings and coins caused notable market fluctuations. On January 22, the duty increased from 11% to 15%, with rates imposed on gold and silver bars for consistency. In this article, we delve into the implications of these changes on gold and silver prices, exploring market dynamics and global influences.

Import Duty Hike and Its Objectives

The Ministry of Finance’s decision to raise import duties on gold and silver findings and coins aims to counter the recent surge in imports of gold components used in jewellery crafting, such as hooks and clasps. The new duty structure, comprising a 10 per cent Basic Custom Duty (BCD) and a 5 per cent Agriculture Infrastructure Development Cess (AIDC), seeks to prevent evasion of duties on these essential elements. This action, exempt from the Social Welfare Surcharge, aligns the duties with those applied to gold and silver bars.

The import duty on spent catalysts with precious metals has risen to 14.35%, comprising 10% BCD and 4.35% AIDC. This adjustment, too, is exempt from the Social Welfare Surcharge (SWS). The objective here is to maintain consistency and curb potential loopholes in duty evasion.

Market Trends and Influences on Gold and Silver Prices

India, as the world’s second-largest consumer of gold, undergoes direct market impacts due to recent policy changes in the sector. The global landscape further contributes to the fluctuation in gold prices, as seen recently. Gold prices experienced an upward movement in the domestic futures market, fueled by favourable global cues. The surge was influenced significantly by the weakening US dollar and the awaited interest rate decisions from various central banks.

Gold, being priced in dollars, benefits from the dollar’s weakness. The expectation of rate cuts adds to the allure of gold as a safe-haven asset. With lower interest rates, the opportunity cost of holding gold decreases, making it more attractive to investors. As per recent updates, MCX Gold exhibited a 0.12% uptrend, reaching ₹61,964 per 10 grams, signalling an optimistic market sentiment.

In conclusion, the recent adjustments in import duties on gold and silver findings and coins, along with the increased duty on spent catalysts containing precious metals, showcase the government’s commitment to maintaining fair practices in the market. Therefore, these changes might initially impact the industry. Still, the broader context of global market trends, especially the weakened US dollar and expectations of interest rate decisions, contribute significantly to the ongoing fluctuations in gold and silver prices.

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