Page 12 - Bollion World Volume 4 Issue 8 August 2024

Bullion World | Volume 4 | Issue 8 | August 2024

Implications for Gold Demand demand, especially as the festive season approaches.
The customs duty reduction has the potential to Market experts predict a price drop of ₹300 to ₹500
significantly increase gold demand during the upcoming per gram for 24-carat gold, encouraging postponed
buying season (August to December) and over the purchases.
long term. Our econometric model suggests that Indian
consumer demand for jewellery and gold bars and coins Lower prices are also set to benefit companies by
could see an additional 50 tons in the second half of potentially increasing their revenue and profits through
2024 due to more attractive pricing and alignment with volume growth. Stocks of listed jewellers like Titan
international prices. Company, Kalyan Jewellers India, and Senco Gold have
appreciated following the budget announcement.
Additionally, the recategorization of gold ETFs and
mutual funds is expected to boost investment in these Furthermore, the reduced gold smuggling due to
assets, making the investment landscape more attractive competitive mainstream market prices will benefit the
and equitable. This change is likely to drive further industry. However, increased gold demand may lead
inflows into gold ETFs, which have seen steady growth to higher imports, potentially impacting the Indian
since April 2013. rupee, which is already near an all-time low against the
dollar. According to the Reserve Bank of India, India
Initial Market Reaction imports gold worth an average of $36 billion annually,
Following the Union Budget announcement, the Indian constituting about 8% of total imports.
domestic gold price fell by 7%, and the net asset value
(NAV) of gold ETFs dropped by 6.5% to 8.9%. There has In conclusion, the 2024-25 Union Budget's pro-gold
been a noticeable increase in foot traffic at retail jewellery measures are expected to have wide-ranging positive
shops and a rise in the local gold price premium, which implications for both consumers and the gold industry,
had been trading at a discount to international prices for fostering growth and increasing demand.
the previous five months.

Benefits for Consumers and Companies
The reduction in total tax on jewellery from about 18% to
9%, including the 3% GST, is expected to boost jewellery

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