Budget 2025 Expectations: How Customs Duty Cut Impacted Gold Prices In India, What Will Trigger Prices Ahead?

Gold prices in India continue to surge at new record highs and January 30th was no different. MCX gold prices have crossed Rs 81,100 per 10 grams for the first time. While silver prices also traded range-bound. The latest uptick in gold is despite US Federal Reserve keeping key interest rates unchanged after 100 bps cut in 2024. Dollar is stable, but gold is shining. In India, one of the major drivers for yellow metal prices is the expectation of further revision in import duty in Budget 2025, which is likely to make gold attractive, especially ahead of the upcoming wedding season.

The last cut in customs duty took place in Budget 2024, and that was one the biggest reasons why gold was in demand and rallied to new heights.

Gold Prices In India:

On January 30th, ahead of Economic Survey and Budget 2025, 24K gold price surged by Rs 1,700 to Rs 8,30,200 in 100 grams and higher by Rs 170 to Rs 83,020 per 10 grams. 22K and 18K gold prices also climbed by Rs 150 and Rs 130 in 10 grams to Rs 76,100 and Rs 62,270. Gold prices in India have surged by 6.4% in January 2025 so far.

Silver Prices In India:

A sharp surge was also seen in silver prices by Rs 2,000 to Rs 98,500 per 1kg, while 1 gram of silver was up by Rs 2 to Rs 98.50. In cities like Chennai, Hyderabad and Kerala, silver prices were expensive at Rs 1,06,000 per 1kg which was near new heights. Silver prices are up nearly 9% in January 2025 so far.

MCX Gold, Silver Prices:

MCX gold price touched a new record of Rs 81,128 per 10 grams, while MCX silver price neared Rs 92,500 per 1kg mark. Both the prices have rallied significantly in the current month.

During Budget 2024, Finance Minister Nirmala Sitharaman trimmed custom duty on gold and silver bars by a massive 60% to 6% from the earlier 15% in the Budget FY25 announcement. Additionally, customs duty on gold and silver gore has been cut by 62.7% to 5.35% from earlier 14.35%. This led to a significant jump in gold prices. In 2024 alone, gold rose by 25% and broke at least 40 new record highs. Total gold demand surpassed $100 billion for the first time in Q3, driven by its role as a hedge against rising geopolitical tensions, currency debasement, and market volatility.

Know How Customs Duty Cut Has Impacted Gold Prices?

Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited (RSBL) said, that in July 2024, the reduction in import duty from 15% to 6% on gold played a significant role in stabilizing gold prices domestically, narrowing the price gap between international and Indian markets. The move helped curb gold smuggling and encouraged formal imports through official channels, improving transparency and government revenues. Lower duties also made gold slightly more affordable for consumers, supporting retail demand despite global price volatility.

What To Expect In Budget 2025?

Kothari said, "The bullion industry anticipates further revisions in import duties in the upcoming budget. In budget 2025, stakeholders are lobbying for a reduction from 6% to 3%. This cut would align Indian gold prices more closely with global benchmarks, reducing the incentive for illegal imports through Free Trade Agreement (FTA) routes and Least Developed Countries (LDCs)."

Lastly, he added, lower prices may revive retail and investment demand, especially during the upcoming wedding season. While reduced duties may initially ease domestic gold prices, strong global trends and a weakening rupee could offset these gains. Overall, any duty cut would support long-term price stability while enhancing demand and reducing market inefficiencies.