NEW DELHI: Gold began its remarkable rise during the global financial crisis of 2007-08, and its upward journey continued until the beginning of this year. In May, however, the Government raised effective import duty on gold and silver to 15 per cent in a bid to curb foreign exchange outflows.
This drastic step, coupled with rising global prices, dealt a severe blow to bullion markets across the country. From stockists and shopkeepers to consumers, everyone felt the impact. Sales plummeted, markets wore a deserted look, and consumers remained on the sidelines. It seemed as though the bullion business was nearing its end.
Back in the limelight
But gold, being gold, has once again shown its resilience; coming back in the limelight. Indians’ enduring love for gold has also rekindled, raising hopes of a bright Diwali. “We are expecting good sales this festive season, as gold prices have fallen to a more reasonable level. Customers are showing interest, and we are hopeful of a grand Diwali,” said Yogesh Singhal, President of All India Bullion & Jewellers Association, Delhi.
Explaining the reasons for his optimism, Singhal pointed out that gold prices have not risen over the past six months. “We have been facing a recession-like situation for the past nine months, but things are changing now,” he said. Another trader said that customers had started returning to the market and that sales appeared set to pick up after a prolonged lull.
It is worth noting that the Government had imposed an additional import duty on both gold and silver. As a result, imports of these precious metals have declined alongside their prices. At the same time, the higher duty has reportedly encouraged gold smuggling to resurface, a practice that was prevalent during periods of high import taxation.
Gloom is lifting
According to Gold Price History, there appears to be little indication of an imminent rise in international gold prices, as reflected in December futures on the Multi Commodity Exchange (MCX). Experts suggest that precious metal prices may not rise in the near future, given the absence of strong supporting factors.
The gloom that had enveloped bullion markets appears to be lifting, with a ray of optimism emerging. Traders are hopeful that the festive season will revive demand and help sales return to previous levels. Whether this optimism translates into a sustained recovery remains to be seen.
