MCX Gold and silver prices plunge 5% after customs duty reduced on Gold and Silver

Gold and silver faced selling pressure after Finance Minister Nirmala Sitharaman announced a cut in customs duties to 6%. The Union Budget for the coming fiscal year included a reduction in customs duties to enhance domestic value addition in gold and precious metal jewelry. The total customs duty on gold and silver has been reduced from 15% to 11%, which includes a 5% Agricultural Infrastructure Development cess.

Following the announcement, gold futures on the Multi Commodity Exchange (MCX) were trading lower by 5.28% at ₹68,877. The yellow metal had hit a high of ₹72,850 before facing significant selling pressure. Gold futures on the exchange were trading at the lowest level in three months, hitting a low of ₹68,500. Silver futures on the MCX suffered similarly, down by over 4% and trading at ₹85,435, off their intraday low of ₹84,275.

Additionally, the government announced a cut in customs duties on platinum to 6.4%. To reduce the cost of steel and copper production, the government reduced the basic customs duty (BCD) on ferro nickel and blister copper. The government will continue with nil BCD on ferrous scrap and nickel cathode and a concessional BCD of 2.5% on copper scrap.

A reduction in gold customs duties will result in a decline in domestic prices, which is expected to boost demand. However, higher demand for gold could ramp up prices globally, potentially widening the country’s trade deficit and weakening the rupee.

The reduction in gold prices led to a surge in the prices of gold and jewelry stocks. Titan saw its share price rally by over 6% to ₹3,468 per share. Kalyan Jewellers was up by 4.43% to ₹552.75. Rajesh Exports, Senco Gold, and PC Jeweller were among other companies that saw gains of over 5% on Tuesday.