Should you buy gold ahead of Budget 2025 amid customs duty hike buzz? | Stock Market News

Speculation is rife that the government may announce an increase in customs duties on gold in the Union Budget 2025, a move that could boost gold prices. Therefore, buying gold during price dips at this juncture could be a tactical move, according to experts.

The full FY25 budget, presented on July 23, 2024, reduced the customs duty on gold and silver bars from 15 per cent to 6 per cent. After this, gold imports surged by approximately 104 per cent year-on-year in August 2024, reaching $10.06 billion. However, during the same period, India’s gem and jewellery exports declined by over 23 per cent, falling to $1.99 billion, according to a Hindustan Times report.

In the last Budget, the government reduced customs duty on gold to stabilise prices amid persistent inflation and ensure an adequate supply. However, reducing import duty has raised concerns about increased consumption, which could widen the trade deficit. As the world’s second-largest consumer of gold, India relies heavily on imports to meet most of its demand.

Should you buy gold ahead of Budget 2025?

Gold prices rose last week despite the strengthening dollar. Healthy demand from the spot market and weakness in the domestic equity market supported the prices in the futures market, which rose about 1 per cent last week.

As Mint reported, the MCX gold rate finished at ₹79,019 per 10 gm on Friday, logging around 0.80 per cent weekly gain against the previous Friday’s close of ₹78,400 per 10 gm.

The yellow metal may witness fresh traction in the domestic market if the government increases its customs duty.

According to Sugandha Sachdeva, the founder of SS WealthStreet, the government may increase the basic customs duty on gold in Budget 2025 to control rising imports.

Sachdeva pointed out that India spent $47 billion on gold imports during the first 11 months of 2024, significantly higher than the $42.30 billion spent in the entire year of 2023.

“To curb this rising trend, especially following last year’s unprecedented cut in import duties, the government may consider hiking the duty in the Union Budget 2025,” Sachdeva said.

“An increase in import duty would elevate the landed cost of gold, consequently driving up domestic prices. This makes buying gold during price dips a tactical move, as investors could benefit from the anticipated price increase in the short term,” said Sachdeva.

However, increased customs duty is not the only trigger for gold prices. Experts say that even though the government does not touch customs duty, gold prices may rise because of global uncertainty.

“Even without a duty hike, the global economic landscape remains uncertain. The potential for policy shifts under US President Donald Trump’s second term could enhance the safe-haven appeal of gold. Market participants will also closely eye the US Federal Reserve’s policy meeting scheduled later this month. With core inflation easing in December after being sticky for the last couple of months, the Fed may reconsider its stance on interest rate cuts, which could support gold prices,” Sachdeva said.

Sachdeva observed that gold prices currently hold above the crucial support level of ₹76,000 per 10 grams.

“On the upside, the near-term resistance is at ₹79,200 per 10 grams. A decisive breach of this resistance level could open the door for prices to test record highs, while failure to break it might trigger a downward correction,” said Sachdeva.

Anuj Gupta, the head of commodity and currency at HDFC Securities, underscored that gold prices will be dominated by the “Trump factor” and the Union Budget 2025 in the coming weeks.

“The market is keen to know Donald Trump’s administration’s outlook on the US economy amid the US Fed rate cut buzz. In the domestic market, there is a buzz about customs duty hikes on nearly 20 items, including gold. If this happens, MCX Gold rates may see a big spike. So, any dip in MCX gold rates should be seen as a buying opportunity ahead of the Union Budget 2025,” said Gupta.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.