Gold Rate Gained Rs 26,560 In 10 Grams After Customs Duty Cut: How Are Gold Jewelers Impacted? Outlook Ahead

Gold Rates In India: It's been over 11 months since the Indian government trimmed customs duty on gold by 900 basis points to 6% from 15%, the lowest in the past decade. Despite the import duty cut, gold prices have skyrocketed by double digits. 24-carat gold in 10 grams has surged by Rs 26,560 or 37.5%. The short-term impact of the duty cut resulted in a decline in gold prices and a surge in gold demand but also brought gold jewelers margins under pressure. However, geopolitical tensions and global uncertainties pushed haven higher, subsiding the relief of customs duty.

Gold Prices In India:

On June 28, gold prices in India dropped by Rs 600 in 10 grams of 24 carats to Rs 94,720, while 10 grams in 22 carats and 18 carats plunged by Rs 550 and Rs 450 to Rs 89,300 and Rs 73,070, respectively. Overall, in June 2025, gold prices traded volatilely and are currently marginally up for the month.

Gold climbed by 2% in May 2025, followed by a 5.5% upside in April 2025 and a 6.1% surge in March 2025. Gold saw its biggest surge in January 2025, by more than 8% across carats, while it was up by 3% in February.

Year-to-date, gold rates in India are up by 24-25% so far.

But from July 23, 2024, when the customs duty cut was announced in Budget FY25, gold prices have surged nearly 37.5%.

Gold Prices After Customs Duty Cut:

The 24-carat gold price stood at Rs 70,860 on July 23, 2024. From this level, the 10-gram gold price zoomed by Rs 26,560.

During Budget FY25, after the saffron party won the general election, Finance Minister Nirmala Sitharaman announced the full-fledged Budget, where she reduced the total customs duty on the import of gold to 6% from 15%. Also, the duty on gold ore imports was brought down to 5.35% from 14.35%. Meanwhile, platinum and silver bars also recorded a sharp decline in their duty to 6.4% and 6%, respectively.

According to ICRA, the sharp reduction in import duty rates resulted in a decline in gold prices in the domestic market and, consequently, the landed cost. The demand for gold jewelry improved to some extent immediately after the duty cut due to reduced gold prices.

However, ICRA added, "gold prices continued to rise subsequently on the back of geopolitical tensions and apprehension of tariff imposition by the US, partially offsetting the impact of duty cut on gold prices."

So far, data from ICRA revealed that the duty cut resulted in a reduction of unofficial gold imports, as evidenced by an increase in official gold bullion imports by ~8% in FY2025 despite the overall demand remaining flat (sales of 782 MT of gold jewellery/ bullion/ bars in FY2025 vs 774 MT in FY2024).

But on the flip side, the sharp correction in gold prices did result in short-term inventory loss.

How Gold Jewellers Were Impacted?

In ICRA's view, jewellers experienced a temporary loss as gold prices dropped immediately after the duty cut. However, jewellers who do not hedge their gold inventory benefitted considerably from the subsequent rise in gold prices, which outweighed the temporary inventory losses inflicted by the duty cut.

Also, gold inventory plunged!

GML is a popular form of working capital borrowing among gold jewellery retailers, offering the added advantage of hedging. Jewellers using GML for gold procurement are protected from gold price fluctuation, as GML is denominated by the weight of gold and the equivalent value of this gold weight needs to be repaid to the lender anytime within 180 days. Jewellers align GML repayment dates (may be done in tranches) with the sale of jewellery from the gold bullion procured through GML. Hence, the movement in gold prices between the bullion purchase date and the jewellery sale date does not impact the jewellers' profits. However, GML does not cover import duty on gold, which needs to be paid upfront at the time of import, as per ICRA.

Thereby, the duty cut resulted in temporary losses on gold inventory procured through GML prior to the duty cut. Jewellers using GML reported such losses mostly in Q2 and Q3 FY2025, till the exhaustion of the inventory on which a higher duty had been paid.

Notably, the impact of the customs duty cut was lower in Q3 than in Q2, before reviving in Q4 for FY25. Data from ICRA revealed that the import duty cut on gold w.e.f. July 24, 2024, adversely impacted the OPM of the jewellery retailers, who opted for GML as a source of finance, resulting in around 230 bps and 170 bps reduction in OPM in Q2 and Q3 FY2025, respectively, on a YoY basis.

Also, the unabated rise in gold prices also benefited jewellers in their margin recovery by 110 bps sequentially to 8.0% in Q3 FY2025, though it remained much lower than 9.7% OPM in Q3 FY2024. The OPM of gold jewellery retailers revived to around 8.8% in Q4 FY2025 vis-a-vis 8.4% in Q4 FY2024.

Technical Outlook For Gold Ahead

According to Forex Empire, technically, gold now eyes a pivot at $3228.38, with deeper support seen in the long-term value zone between $3166.48 and $3087.70 should downside momentum accelerate. Traders will be watching the $3323.80 resistance closely to gauge potential corrective bounces.

However, the Forex Empire report added, that with safe-haven demand reduced and inflation data set to influence rate expectations, gold prices projections maintain a bearish bias in the near term, requiring a clear catalyst for a sustainable reversal.

Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on the article mentioned. Neither, the author, GoodReturns.In nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.