India's Gold Demand Soars in August After Duty Cut

Chennai: The duty cut announced in the Union Budget allowed investors to grab the yellow metal as is evident by the inflows into gold exchange-traded funds in August and the spurt in sales in retail stores. Gold ETFs saw inflows tripling in August compared to previous months.

The government had brought down the basic customs duty on gold bars from 15 per cent to 6 per cent in the Budget presented on July 23. Subsequently, in August gold ETFs saw total inflows of Rs 2129 crore against Rs 752 crore in June and Rs 704 crore in April, as per AMFI data. Even in July, total inflows almost doubled to Rs 1465 crore compared to June as investors rushed to buy the virtual asset. Gold had become cheaper by more than Rs 6000 per 10 gm due to the duty cut.

The assets under management by 17 gold ETFs went up to Rs 37,390 crore at the end of August against Rs 24,318 crore in August 2023.

Meanwhile, jewellery retailers too saw buyers making most of the duty cut in August. “After the gold duty cut was announced, we saw a spurt in demand in August. Apart from the duty cut, the gold prices in the international market also remained subdued in the month. In volume terms, we saw around 30 per cent higher sales in August compared to July,” said Bachhraj Bamalwa, former chairman of All India Gem & Jewellery Domestic Council (GJC).

“When compared to August last year also, last month saw more than 20 per cent higher sales in volume terms. However, September sales are slower as the prices have once again gone up and are above the levels seen before the duty cut,” he added.

The demand in the market also was evident from the fact that the discount in the gold trade dropped significantly in August. In June and July, gold in the wholesale market was available at a discount of $15- 20 per ounce. The discount dropped to half a dollar per ounce as the demand went up.