Gold Prices In India To Trend: Custom Duty To Regulations, Top 5 Expectations From Budget For Bullions

Gold prices in India witnessed a sharp jump in the latest week ahead of the Union Budget 2025 announcement which is scheduled on February 1. Both gold and silver prices have climbed by 8-9% each in January 2025. MCX gold prices have also crossed Rs 82,000 mark for the first time. The bullion market expects revision in custom duty, regulatory simplification and special benefits for gold import and exports through IIBX. Gold prices will be in focus amidst FM Nirmala Sitharaman's budget speech.

Gold Prices In India:

Ahead of Budget, massive surge was recorded across gold carats on January 31. 24K gold price skyrocketed by Rs 13,100 in 100 grams to Rs 8,43,300, while 10 grams gold surged by Rs 1,310 to Rs 84,330. The prices are at fresh all-time high.

Meanwhile, 22K gold price zoomed by Rs 12,000 to Rs 7,73,000 in 100 grams, and higher by Rs 1,200 in 10 grams to Rs 77,300. Further, 18K gold price were at Rs 6,32,500 in 100 grams, higher by Rs 9,800. Also, 10 grams of 18k advanced by Rs 980 to Rs 63, 250.

Silver Prices In India:

Silver prices also jumped by Rs 1,000 to Rs 99,500 per 1kg, while in cities like Chennai, Hyderabad and Kerala, the prices shot up to new high of Rs 1,07,000 per 1kg.

Dr. Renisha Chainani, Head- Research, Augmont said, Jewelers, Jewellery Associations, Bullion Traders, Bullion Refiners, etc, and most of the Bullion market participants have a lot of expectations from the Budget every year for the development of the Bullion Industry."

Here is the list of the top five expectations from this budget as per Chainani:

1. Reduction in Import Duty on Gold and Silver from 6% to 3%:

Current Scenario: In Budget 2024 the import duty for gold and silver was cut from 15% to 6%, narrowing the duty gap between India and other countries, which led to a big jump in demand.

Reasons For Change: Further duty is expected by market participants to make India's jewellery exports more competitive. But I feel, there won't be any duty cut in this budget, after a 9% duty cut six months back.

2. Reduction in import duty for Dore Gold and Silver:

Current Scenario: India's gold refining capacity is 1800 tonnes per annum, out of which 250 tonnes of dore gold is refined, which means capacity utilization is just 15%. Dore Gold and Silver are imported at 5.35% while refined gold is imported at 6%, which means the duty difference/refining margin is just 0.65%, which is much less.

Reasons For Change: Bullion refiners have been working on this paper-thin margin of just 0.65% since 2016. This margin should be increased by at least 1% to encourage gold refining in India by reducing the import duty on dore imports.

3. Appointment of a single regulator for the gold market:

Current Scenario: The bullion market is regulated by SEBI, RBI, DGFT, Ministry of Finance, Ministry of Commerce, etc., currently and all regulatory frameworks/ announcements impact the market.

Reason For Change: A uniform regulatory framework has the potential to simplify supervision while increasing market efficiency and transparency.

4. Special benefits for gold import and exports via IIBX:

Current Scenario: Since its launch in 2022, the IIBX at GIFT City has been developing as a gateway for importing bullion. This platform for storage and trading in gold and its derivatives has become a significant route for gold imports into India. IIBX gold imports have grown from 411 kg to 67827 kg in the last three years.

Reasons For Change: The industry feels the time is right to give IIBX more teeth, like a special benefit of 0.5% for gold imports via IIBX. Also, IIBX should be considered as a Jewellery Export centre, which will enhance the gold market and contribute to economic growth.

5. Regulation in the Digital Gold Market:

Current Scenario: Digital Gold is a more than 10-year-old gold investment option in India, which is self-regulated. With India getting more digital, GenZ and Millennials are moving towards buying Digital Gold at their fingertips due to its propensity of affordability, accessibility, convertibility, transparency and security.

Reasons For Change: According to WGC, over 12 crore customers have engaged in digital gold transactions, with approximately 4 crore currently holding digital gold. A regulator can bring integrity, consumer protection and trust among investors by facilitating micro-savings and deterring fraudulent activities.