Import duty cut lowers gold prices, expected to boost demand in world’s second-largest consumer
Wed Aug 07 2024
A gold import tax cut by India, the world’s second-largest gold consumer, has lowered prices in the country and is expected to revive domestic demand in the coming months. The import tax reduction from 15% to 9% for gold was one of the several pro-gold policy measures introduced in India’s federal budget in late July, according to the World Gold Council (WGC).
The week it was announced, the measure brought down gold prices in India to 67,500 rupees (US$805.6) per 10 grams, their lowest in four months, from a record high of 74,777 rupees earlier in July, Reuters reported.
Industry experts expect the decline in prices to boost demand for the precious metal in the world’s second-largest gold consumer, especially as the buying season is approaching.
Gold demand in India typically rises to its highest in the fourth quarter due to weddings and festivals such as Dussehra and Diwali, with buyers often scheduling their purchases around these occasions, as reported by SCMP. According to the WGC, weddings account for approximately 50% of India's annual gold demand. Hence, an import duty cut introduced before the main festival season's start in September will likely revive gold demand, Reuters quoted Sachin Jain, CEO of WGC's Indian operations, as saying. India's gold consumption previously dropped 5% year-on-year to 149.7 tons in the second quarter.
Jain also noted that recent favorable monsoon showers have boosted food grain production and improved farmers' income, potentially increasing gold consumption as rural areas typically contribute to two-thirds of the country's demand. A surge in Indian consumption, fueled by the cut in gold import tax, could potentially contribute to boosting global prices, the Economic Times reported.
Nonetheless, it might be balanced out by a decline in China gold demand and result in little impact, according to Ross Norman, CEO of London-based gold news site Metals Daily. "However, gold has lost momentum to the upside, so I would expect a decline in Chinese demand being offset by increases in Indian demand – on a net basis little change," he told SCMP.
The WGC speculated that India’s demand for gold could total 700-750 tons this year. The country consumed 761 tons of the precious metal last year.
Source: https://e.vnexpress.net/