Soon after finance minister announced an increase in customs duty on gold, silver from 10 per cent at present to 12.5 per cent, gold for August delivery on the MCX rose by 2.5 per cent, from Rs 34,215 per 10 gram to Rs 35,100. September silver rose from Rs 37,660 per kg to Rs 38,940. However, by 5 p.m. gold futures shed Rs 200 and silver Rs 550, as the physical market was trading at discounts and traders who were long booked profits. In Mumbai's spot market, standard gold closed Rs 811 or 2.4 per cent higher at Rs 34,739 per 10 gram and silver closed Rs 660 or 1,8 per cent up at Rs 37,925 per kg.
The surprisingly steep duty hike, instead of an expected duty cut, has annoyed those trading in the yellow metal. The World Gold Council’s India MD, Somasundaram P R, said, “The hike will impede efforts to make gold as an asset class, particularly when prices are already rising globally. In addition, the grey market will thrive and dilute efforts to reduce cash transactions.”
Ahammed M P, Chairman, Malabar Gold & Diamonds said the move will lead to a substantial increase in input costs of the industry pushing retail prices up and hitting sales.