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Gold, silver prices in India head south after import duty cut

Prices of gold and silver fall

Gold and silver prices fell for the second consecutive day on Tuesday following the reduction in customs duty announced in the union budget on imports of the two precious metals.

On MCX, gold April futures were seen trading at Rs 48,380 per 10 gram, down Rs 340 or 0.70 per cent. While silver March futures declined Rs 1,835 or 2.49 per cent to Rs 71,831 per kg on Multi Commodity Exchange.

Gold prices had fallen from Rs 49,570 per 10 gram to Rs 47,201, a decline of Rs 2,369 or 4.77 per cent after the customs duty cut introduced in the budget.

Finance Minister Nirmala Sitharaman has reduced customs duty on gold and silver as the prices of the two precious metals have soared. The customs duty on gold has been reduced to 7.5 per cent. Sitharaman said, "Gold and silver presently attract a basic customs duty of 12.5%. Since the duty was raised from 10% in July 2019, prices of precious metals have risen sharply. To bring it closer to previous levels, we are rationalising customs duty on gold and silver."

“Domestic gold prices have become cheaper due to the duty cut. However, the general price trend will be determined by international markets,” says Ravindra Rao, head of commodity research at Kotak Securities.

Experts say gold may continue to witness mixed trends in the international market depending on which way the US dollar moves but the general bias may be on the upside owing to global growth worries and possibility of a US stimulus.

In another announcement, the government said that capital market regulator Securities and Exchange Board of India (Sebi) will be the designated regulator for gold exchanges which will infuse transparency in gold transactions.

 Most of the commodity experts welcomed the cut in customs duty announcement, as they believe that this step will encourage more gold buying among customers.

COMEX gold was trading little changed near $1865/oz after a 0.7 per cent gain on Monday. the gold is choppy amid mixed trade in the US dollar index and as market players assess the possibility of a US stimulus deal.