Jewellery stocks shine on as customs duty on gold slashed in Budget 2024

The immediate outlook for gold will primarily depend on path of US dollar and US interest rate.

Jewellery stocks extended their shine as Finance Minister Nirmala Sitharaman proposed to cut the customs duty on gold and silver to six percent in the Union Budget 2024.

In the Budget, the Finance Minister announced a reduction on Basic Custom Duty on gold and silver from 10 percent to 6 percent and Agriculture Infrastructure & Development Cess (AIDC) from 5 percent to 1 percent. It will effectively reduce the overall taxes on gold from around 18.5 percent (including GST) to 9 percent.

Jewellery firms such as PC Jeweller, Senco Gold, Thangamayil Jewellery and Titan clocked sharp gains in trade.

At 1.55 pm, PC Jeweller was at its upper circuit of five percent, while Thangamayil Jewellery and Titan clocked gains in trade.

Metals and agricultural fertilizers MMTC saw only buyers at its 20 percent upper circuit, as the budget's measures boosted investors' sentiment towards the counter.

Bhavik Patel, senior commodities analyst, Tradebulls Securities said, "The outlook of Gold looks strong despite import duty cut to 6 percent as with duty cut, it will make gold cheaper domestically which will increase the demand for physical gold."

However, while physical gold might outperform, Jigar Trivedi, senior commodities analyst at Reliance Securities said that it might impact the demand for gold futures.

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The cut in customs duty will also benefit the government as it will reduce smuggling of gold from the Middle East. The outlook for silver is also positive, but may not outperform gold in medium term, analysts said.

The immediate outlook for gold will primarily depend on path of US dollar and US interest rate. Market has already priced in September’s rate cut and once Fed starts on the path of cutting rates, both gold and silver has no other way but only to go up, added Patel.

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