Financial Fix | Why Gold Prices are Decreasing and What You Should Do

By Irshaad Mushtaq

The recent Union Budget 2024 brought significant changes to gold trading by reducing customs duty on gold from 10% to 6%, leading to a decrease in gold prices. Now might be a good time to consider investing in gold through ETFs or SIPs via mutual funds (Gold funds).

The Union Budget 2024 introduced notable changes in gold trading, particularly by reducing customs duty on gold from 10% to 6%. This led to a significant decrease in gold prices. Now might be a good time to consider investing in gold through ETFs or SIPs via mutual funds (Gold funds).

On July 24, the Union Budget 2024-25 outlined various changes impacting gold trading, including adjustments to Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG). A key announcement was the reduction of customs duty on gold and silver from 10% to 6%, resulting in a substantial drop in gold prices.

Presently, gold is trading at around ₹67,834 on the Multi Commodity Exchange (MCX). Prior to the budget, gold futures hit a record high of ₹74,777, but following the announcement, prices fell to ₹67,800, reflecting a decrease of ₹6,977 (9%) from the peak. Similarly, silver futures on the MCX declined from an all-time high of ₹98,220 to ₹82,083, a drop of 16,150 points.

The customs duty reduction aims to enhance domestic value addition in precious metals and bolster the jewelry sector. The Finance Minister stressed that this measure would invigorate local industries and increase their competitiveness. Given that India is the world’s second-largest gold consumer after China and imports most of its gold via official channels, this reduction is quite significant. In the fiscal year 2023-24, India imported gold valued at ₹45.5 billion, up from ₹35 billion in 2022-23, with major imports from Switzerland, the UAE, and South Africa.

The initial drop in gold prices is expected to be temporary, presenting a potentially good buying opportunity. This customs duty reduction could be a strategic time to invest in gold during price dips through gold ETFs (Exchange-Traded Funds), silver-gold funds, or digital investments via mutual fund gold funds. Investing in a staggered manner using SIPs (Systematic Investment Plans) offers a convenient and secure digital way to invest in gold.

Learn from the insights of writer, investor, entrepreneur, founder of MI Securities and Business Partner at Sharekhan Srinagar J&K. Reach out at [email protected] for valuable financial advice

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