New Delhi: Gold jewellery and bars are set to get more expensive with the government announcing a steep increase in the import duty of the yellow metal on Monday. The move to slap an import duty of 6% was triggered by the need to rein in the widening current account deficit and help better macro-economic management. Import duty was doubled to 4% in March last year in an attempt to temper the surge in gold imports.
While some amount of the increase has already been factored in gold prices in anticipation of the duty hike, experts say a further increase is inevitable, which may lead to a dip in demand in the near term. "People who had to purchase for marriages have already done so. At least in the next three to six months, prices will remain high leading to a dip in demand," said Jayant Manglik, president, retail distribution, Religare Broking. Worried over the surge in gold imports, the government had earlier this month indicated the possibility of unveiling measures to make gold imports costly. This had led to a sharp increase in the import of the yellow metal in the last three weeks. According to market estimates, import of gold increased three fold between the last week of December and the first week of January.
"Imports increased to 60-70 tonnes since December last week to January first week. This was higher than imports we have seen in any normal two week period which is around 15-20 tonnes," said Prithviraj Kothari, director, RiddhiSiddhi Bullions. Gold prices, which had already shot up in anticipation of the duty hike, rose by over Rs 300 in the capital on Monday to Rs 31,250 per 10 grams after the government announced the measures. Global price of gold also increased 0.03% to $1,687 an ounce, data showed. Experts say the import duty hike may increase the risks of illegal trade of the precious metal. Analysts said the impact on demand would be greater for gold in investment form as against physical gold. "In the broader picture, the duty hike will be a negative for gold demand as well as price. People are no longer sure on how gold prices will remain in the long term," said Gnanasekhar Thiagarajan, director, Commtrendz Research, an advisory firm.
With the rupee expected to appreciate, analysts say prices are likely to stabilize in the second half of the current financial year. The Indian currency stood at 53.77 against the dollar on Monday. According to market estimates, gold prices are likely to hover in the range of Rs 29,000-Rs 32,000 per 10 grams in the near term. Experts said demand for gold is likely to moderate as the world economy shows signs of stabilizing. "The major world economies are currently looking good. Gold demand will not pick up unless there is uncertainty in the market," Thiagarajan added. Despite an increase in duty last year, gold demand in India increased by 9% to 223.1 tonnes in the September quarter.
No comments:
Post a Comment