Depreciating rupee, hike in duty causes gold to lose sheen

Panaji: With the Centre increasing import duty on imported gold, jewellers have seen a significant drop in footfalls at stores in Goa. While the sentiment among buyers appears muted, some customers have opted to take advantage of the high prices to exchange their gold ornaments for new designs.

According to Goa Gold Dealers Association president Pramit Raiker, the aggressive policy move has caused demand for gold to collapse by nearly 20-30%. The primary trigger for this pause in splurging was the hike in basic import duty from 6% to 15% on gold and silver. And if one takes into account GST on gold, the total effective tax burden on gold has jumped from 9.2% to a staggering 18.4%.

“People are coming in to exchange their old gold to recycle and make new jewellery. More than 70% of the walk-in customers are recycling,” said Raiker.

The jump in gold prices came amidst the wedding season, and many customers opted to reduce the quantum of purchases, said a gold jeweller from Margao.

Facing immense pressure, the gems and jewellery industry has urged the Centre to overhaul and revive the gold monetisation scheme (GMS).

Raiker said that the gold monetisation scheme can help revive demand, which in turn will support the jewellers, artisans, and craftsmen working in the industry. He said that industry members should be consulted before the gold monetisation scheme is relaunched.

“Govt had no option but to increase the duty, but this is not sustainable in the long run. I have around 20 workers, and if the demand keeps falling, I will have to let some of them go,” said a jeweller from Panaji.

However, there is a silver lining. Prices for the yellow metal have corrected over the past three days, mirroring a steep decline in global bullion markets, where gold recorded its biggest single-day fall in more than two months. Easing of the geopolitical tensions and monetary policy interventions have led to prices cooling off.

“Over the past two to three days, gold prices have gone down by Rs 6,000-7,000 as international prices have also come down. We will come to know the effect of this on customers in the week ahead,” said Raiker.

He said that some jewellers are offering incentives in terms of discounts or full valuation of old gold ornaments.