Budget mood over? Gold prices in Kerala jump by Rs 200 a sovereign

The reduction in gold import duty announced during the Union Budget 2024 led to a decrease in prices in Kerala for two days, but on Saturday, the price per sovereign increased by Rs 200. The price of one sovereign of gold in the state is now Rs 50,600. One the other hand, price per gram rose by Rs 25, taking the rate to Rs 6,325.

Following the budget announcement on Tuesday, gold prices fell. Notably, major players in the market saw their share prices rise by more than 10% during intraday trades on the same day.

In the following days, the price of gold per sovereign dropped by Rs 3,560. Similarly, in the commodity market MCX, the price of gold fell by 10% after 17th July. However, with the release of the US inflation rate, a slight increase was recorded on Friday.

The trend in the global market shows a decrease in gold prices. The reduced demand from China has been a setback for gold.

Customs duty slash

In the Union Budget, the government reduced the customs duty on gold to 6 per cent. Finance Minister Nirmala Sitharaman stated that the 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.