Gold prices have dropped over ₹13,000 since PM's appeal
What's the story
Since Prime Minister Narendra Modi's call for Indians to postpone gold purchases, gold prices have dropped by over ₹13,000 per 10gm. On May 10, when he appealed, 24-carat gold was priced at around ₹1,53,140 per 10gm. By June 28, the price had fallen to approximately ₹1,39,873 per 10gm. Silver too witnessed a similar decline during this period.
Economic strategy
What was the reason behind Modi's appeal
The Prime Minister's appeal came amid rising geopolitical tensions in West Asia and concerns over India's import bill. He urged citizens to postpone non-essential purchases, including gold and foreign vacations, for a year. "We have to save foreign exchange by any means," Modi said, emphasizing the need to conserve foreign exchange reserves and support the rupee at a time of elevated oil prices and external uncertainty.
Duty increase
Government hiked import duty on gold, silver
In line with Modi's appeal, the government hiked the effective import duty on gold and silver to 15%. The move was aimed at curbing imports and reducing pressure on foreign exchange reserves. Suvankar Sen, Managing Director and Chief Executive Officer of Senco Gold, told Moneycontrol this could significantly affect consumer demand. He added that the higher import duty would likely moderate gold imports by 10-15%.
Market trends
Impact of higher import duty on gold demand
The correction in gold and silver prices has been in line with a global sell-off in precious metals. Domestic policy measures to curb imports have also contributed to the price decline. India is one of the largest consumers and importers of gold, relying heavily on overseas purchases to meet domestic demand. High imports increase dollar outflows and can widen the trade deficit.