The price of gold soars after the increase in import duties. Is this rise a buying opportunity?


Gold price today: After the increase in import duties on gold from 7.50% to 12.50%, the price of gold saw a sharp rise on the Multi-Commodity Exchange (MCX) and national retail markets . Registration 1,433 for 10g of gain in Friday’s session, the MCX gold rate ended at 51,950 levels as spot gold price finished $2.81 an ounce higher at $1,810.10 an ounce. Thus, the precious metal finished higher in the domestic market this week while it fell in the spot market during this period. In fact, the price of gold recorded a decline of 6.74% in Q1FY23.

According to bullion experts, the price of gold is holding well above the key support of 50,600 on MCX and $1,770 on the spot market. They said that until these support levels in the respective markets are intact, every dip should be viewed as a buying opportunity by precious metals investors.

On the immediate short-term reason for the rise in gold prices, Sugandha Sachdeva, Vice President – Commodities and Currency Research at Religare Broking Ltd, said: “Gold prices have remained trapped in a range this week, where there was a divergence between domestic and international gold prices.The precious metal saw declines in international markets, while it rose significantly in domestic markets amid rising depreciation of the rupee to record levels and a surprise decision by the government to increase import duties on gold by 5%, in an attempt to curb the rise in gold imports and reduce the trade deficit, the government has raised import duties on gold, which will make it expensive and likely dampen domestic demand.”

Gold Price Outlook

Asked about the gold price outlook, Religare’s expert said: “Looking ahead, the gold price outlook is fragile in the near term as tighter global financial conditions limit the rise in the price of gold. precious metal as looming recession risks propel safe haven Elsewhere, energy and other commodity prices fell over the week, dampening inflation expectations to some extent and giving the impression that the Worse may be over for the upward trajectory of inflation. , the US economy contracted at an annualized rate of 1.6% in the first quarter, after expanding at a pace of 6.9 % in the fourth quarter of 2021, adding to fears of a recession, while supporting gold prices to a large extent.

On significant levels with respect to the price of gold in the domestic and spot markets, Anuj Gupta, VP – Research at IIFL Securities, said: “The spot gold price has been able to hold above its major support placed at $1770 an ounce Spot gold price today is in the range of $1770-$1835 If this minor hurdle is broken at 1835 levels $, the next spot gold target would be $1865 and $1900 in the short to medium term.As the spot gold price took strong support at the $1770 levels, each dip between $1790 and $1,800 should be viewed as a buying opportunity by gold investors.”

Investment strategy

Anuj Gupta of IIFL Securities argued that the short-term trend for gold is “sideways with a positive bias” and therefore one should avoid going short in gold and try to maintain a “sideways” strategy. buying on dips” in the short term.

“On MCX, the price of gold has immediate support placed at 51,200 levels while its main support on the Indian stock exchange is placed at 50,600 in 10g levels. On the upside, MCX gold price faces immediate resistance at 52,500 and 53,100 respectively,” said Anuj Gupta of IIFL Securities.

Increase in taxes on gold imports

In an attempt to stem the rupee’s sharp decline and rein in the growing trade deficit, which hit record highs of $23.33 billion in May amid rising import bills, the Indian government increased the import duty on gold by 5 percent. cent in a surprise move, bringing the import duty on gold to 12.50%, while the effective duty on gold will be 15%, including the 2.5% Agri Cess, because the social surcharge of 0.75% has been exempted. In total, the net duty change will be 4.25 per cent. Gold is also subject to an additional 3% GST, which means total levies on gold will be 18.45%.

Disclaimer: The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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