Gold prices drop by Rs 650 to Rs 71,650 per 10g on weak demand, import duty cut

New Delhi: Gold prices dropped by Rs 650 to Rs 71,650 per 10 grams in the local market here on Wednesday, continuing the retreat for the second day in a row due to weak demand from jewellers and import duty cut announced in the budget for 2024-25.

According to the All India Sarafa Association, the precious metal had closed at Rs 72,300 per 10 grams in the previous session on Tuesday after taking a hit of Rs 3,350.

Silver prices, however, remained flat at Rs 87,500 per kg in the local market.

Gold of 99.9 per cent and 99.5 per cent purity slumped by Rs 650 each to Rs 71,650 per 10 grams and Rs 71,300 per 10 grams, respectively.

Traders attributed the decline in gold prices to the government's move to slash customs duties on a range of products, including gold and silver. The customs duty on gold and silver was cut from 15 per cent to 6 per cent.

In the past two sessions, gold prices have tanked by Rs 4000 per 10 grams.

"Gold and silver on domestic front languished in the previous session as the Finance Minister of India announced a cut in import duties taking the market by surprise.

"On the other hand, move on prices on Comex rose, increasing the disparity of it with the domestic prices," Manav Modi, Senior Analyst, Commodity Research at Motilal Oswal Financial Services Ltd, said..

Further, domestic prices could also take some time to digest the full impact of duty cut and get to parity with Comex, Modi added.

In the international markets, Comex gold was trading at USD 2,461.20 per ounce, up by USD 6 per ounce..

"Comex gold prices held above USD 2,400, breaking a four-day losing streak on Tuesday, as the market awaited clarity on the US Federal Reserve's (Fed) first interest rate cut.

"Gold continues to hold gains on Wednesday, trading above USD 2410 per ounce amid anticipation of upcoming US data releases that could support Fed rate cuts," Kaynat Chainwala, AVP-Commodity Research, Kotak Securities, said.

Flash PMI data to be released later on Wednesday from major global economies will be closely watched for early insights into business activity in July, Chainwala said.

Silver was also marginally up at USD 29.38 per ounce in New York.

According to Pranav Mer, Vice President, EBG - Commodity & Currency Research at JM Financial Services, gold prices are trading in positively tracking gains in the overseas market and buying support at corrective levels after Tuesday's sharp sell-off due to duty cuts.

Going ahead, traders' focus will be on the US GDP data due on Thursday and the Personal Consumption Expenditures (PCE) inflation data on Friday, which may give more clues on the Fed's rate cut path, Mer added.