Gold Prices In India: The gold rates in India witnessed a major boost during the last budget due to sharp cuts in customs duty, with prices surging by 28% to 35%. Once again, all eyes are set on Finance Minister Nirmala Sitharaman who will announce the Budget for FY26 on February 1, 2025. This time, the gold industry is expecting the government to review import duties on the yellow metal. Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited (RSBL) in an interview with GoodReturns.In, if import duty on gold is increased, it could impact prices. Nonetheless, he believes gold prices in India could rise above global benchmarks owing to added cost of duties.

Gold Prices In India:

Currently, gold prices in India is at Rs 72,850 per 10 grams in 22K, while the same gold is available at Rs 79,470 in 24K and at Rs 59,610 in 18K. In ten days of January 2025, gold prices showed significant upside with 22K, 24K and 18K prices surging by nearly 2%, this is a far better performance than compared to nearly 1% drop in overall December month.

24K and 22K gold prices in India ended the year 2024 at Rs 77,560 and Rs 71,110 per 10 grams on December 31. Last year, gold recorded fresh 40 record highs alone, while yielding between 25-30% returns making it the best performer compared to stocks and bonds.

One of the major reasons why gold prices surged in 2024 was the customs duty cut in July 2024 when PM Modi-led government trimmed custom duty on gold and silver bars by a massive 60% to 6% from the earlier 15% in the Budget FY25 announcement. Additionally, customs duty on gold and silver gore has been cut by 62.7% to 5.35% from earlier 14.35%.

What To Expect In Budget 2025?

When asked about what the gold market is expecting in Budget 2025, Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited (RSBL) in the interview with GoodReturns.In said, the market is expecting that the government is planning to review and increase the import duties on gold and silver in the Union Budget 2025.

Kothari said, the PM Modi-led government has come to power for a second term in India, and Finance Minister Nirmala Sitharaman is all set to present her seventh Union Budget for FY25-26 on February 1, 2025. In the previous Interim Budget in July 2024, Sitharaman trimmed custom duty on gold and silver bars from 15 to 6%. While customs duty on gold and silver dore was cut from 14.35 to 5.35%.

However, he highlighted that after Budget 2024, in August 2024, gold imports increased by over 104% on an annualized basis to $10.06 billion, while India’s gem and jewellery exports fell by more than 23% to $1.99 billion. Moreover, gold imports increased by a stunning 331.5% to $14.86 billion in November 2024, up from $3.44 billion the previous year. This spike occurred despite a 26.26% drop in gems and jewellery exports to $2.06 billion, indicating that gold imports were primarily sustaining domestic consumption rather than adding value to exports.

The government attributed the increase in gold imports to factors such as wedding and festive season demand, rising global gold prices, investor confidence due to geopolitical uncertainties, and a reduction in customs duty from 15% to 6% in the July budget. Adding he said, “While the duty cut was intended to boost domestic demand and curb smuggling, gold prices have since risen, and some argue that the benefits have been outweighed.”

But a hike in import duty could significantly impact gold prices! Kothari told, if the import duty on gold is increased in Budget 2025, the gold market is likely to react negatively. Higher duties would make gold more expensive, dampening consumer demand, especially in price-sensitive markets like India. It could also fuel an increase in gold smuggling as buyers seek to bypass higher costs, impacting the formal market.

“Gold prices in India would rise above global benchmarks due to the added cost of duties, potentially reducing retail purchases and jewellery exports. Short-term volatility is expected as the market adjusts, with investors and traders responding cautiously to the increased cost burden,” he lastly said.

FM Sitharaman will present her seventh Union Budget for FY25-26 on February 1, 2025.