Budget effect: Gold prices in Kerala hit monthly low

Thiruvananthapuram: Following the Union Budget's announcement of a customs duty cut, gold prices in Kerala fell on Tuesday. The price dropped by Rs 2,000 per sovereign (Rs 250 per gram). As a result, the price of one gram of gold in the state is now Rs 6,495, while one sovereign costs Rs 51,960.

With this Rs 2,000 reduction per sovereign, gold prices have reached their lowest level this month. On July 1, the recorded price for the month was Rs 53,000 per sovereign, which was the lowest.

Reports indicate that rates have decreased in several states. Notably, major players in the market saw their share prices rise by more than 10% during intraday trades on Tuesday.

In the Union Budget, the government reduced the customs duty on gold to 6 per cent. Finance Minister Nirmala Sitharaman stated that this move aims to enhance domestic value addition in gold and precious metal jewellery within the country.

Customs duty, a tax on imported goods, affects item prices in various ways. A reduction in customs duty lowers import costs, which could potentially reduce retail prices if these savings are passed on to consumers. However, the actual price drop depends on how much of the duty cut is transferred to consumers. Companies may absorb some costs to maintain competitiveness. In a competitive market, lower customs duties are more likely to result in lower consumer prices. Conversely, in less competitive markets or under additional cost pressures, the reduction may not fully translate into lower prices. Overall, the impact of reduced customs duty on prices varies depending on business strategies and market conditions.