Budget 2019: Joy for you? Will gold prices fall? This big movement expected to stir yellow metal

Budget 2019: India is among the largest consumers of gold! Yes, we love our yellow metal. Not only this, gold is also the biggest imported asset for Indian government apart from crude oil. There is a great pleasure among Indians to have a physical gold in their hand, either it be bars, coins or jewellery. No, gold ETFs have not been able to attract buyers affection to any large extent. Physical gold is among the safest investment options in the minds of citizens, just like real estate. Indians buy gold almost on every occasion, whether there is a festival or birthdays or marriages, the demand for the metal is unimaginably massive. Gold is also kept as an investment, to be accumulated, not for selling it at some later date, but to pass on down from one generation to the next.

Budget 2019 is the most awaited things for Indians, both citizens and jewelry makers. Now, all eyes are on the finance minister and they are all looking forward forward to the announcement of gold policy draft and the possible reduction in import duties.

Economists at CARE Rating agency said, “Expedite release of the draft integrated gold policy to promote the domestic gold industry and exports of gems and jewellery.”

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— Zee Business (@ZeeBusiness) February 1, 2019

Gold policy has been in limelight since last year, and many officials have hinted that most likely, it will make buying in gold cheaper, transparent and help the industry too. The agenda being to build gold as an asset class for Indians.

When talking about gold policy, one the major points to consider is whether the government  will decide to trim down import duty and GST on it.

In this Budget, CARE expects some reduction. For normal yellow metal - import duty is seen to be trimmed to 5% from current 10%. Whereas 5% duty is also expected in non industrial diamond (other than rough diamonds), i.e., cut and polished diamond; diamonds-semi processed, half cut or broken; lab grown diamonds and cut and polished Coloured gemstone. Currently, these commodities have an import duty of 7.5%.

(Image source: CARE Ratings)

Notably, the government has been altering gold import duty for jewelers on different occasion. The last revision was made in March last year. It is an important that government decides to cut gold import duty in order to avoid straining the country’s current account deficit.

If gold import duties are higher, then it has a direct impact on the consumption of the yellow metal in India, as jewelers tend to raise rates for consumers in order to deal with the import duty burden. Simply put, gold becomes costlier for jewelers and hence in return for citizens as well.

Thereby, if government decides to relax gold import duties in this Budget 2019, then your gold rates will see some revision in a good way as well.

 It is always advisable, that if you are planning to buy gold, make sure you do it when import duties are low.

Recently exporters were exempted from the levy of 3% IGST on gold supplied to them by Nominated Agencies. Extension of the above benefit to silver and platinum supplies.