Experts Predict Gold Prices May Rise Amid Global Uncertainty: Key Factors Include US Fed Policy and Gold’s Safe-Haven Appeal
Will Gold Prices Surge Before Budget 2025? Here’s What Experts Predict
Speculations are mounting about a possible increase in customs duties on gold in the Union Budget 2025, a move that could drive up gold prices. Experts suggest that buying gold during price dips could be a strategic decision in anticipation of these changes.
Customs Duty and Gold Imports: A Look Back
In the Union Budget for FY25, presented on July 23, 2024, the government reduced the customs duty on gold and silver bars from 15% to 6%. This significant reduction led to a 104% year-on-year surge in gold imports in August 2024, amounting to $10.06 billion. However, India’s gem and jewellery exports fell by over 23% during the same period, dropping to $1.99 billion, as per Hindustan Times report.
The previous reduction in customs duty aimed to stabilize gold prices amid inflationary pressures and ensure adequate supply. However, the increased imports have raised concerns about a widening trade deficit, particularly as India, the world’s second-largest consumer of gold, depends heavily on imports to meet demand.
Gold Prices Ahead of Budget 2025
Despite a strengthening dollar, gold prices gained last week, driven by robust demand in the spot market and weak domestic equity performance. On the Multi Commodity Exchange (MCX), gold closed at ₹79,019 per 10 grams last Friday, registering a weekly gain of 0.80% compared to ₹78,400 per 10 grams the previous week.
Experts believe that domestic gold prices could gain fresh traction if the government raises customs duties in the upcoming budget.
Why Customs Duty Could Be Increased
Sugandha Sachdeva, founder of SS WealthStreet, suggests the government may increase the basic customs duty on gold to curb rising imports. During the first 11 months of 2024, India spent $47 billion on gold imports, significantly higher than the $42.3 billion recorded for the entire year of 2023.
“To address this trend, the government may consider a duty hike in the Union Budget 2025,” said Sachdeva. She explained that such a move would elevate the landed cost of gold, driving up domestic prices. “Buying gold during price dips could be a tactical decision for investors, allowing them to benefit from a potential short-term price increase,” she added.
Beyond Customs Duty: Global Factors at Play
Even without changes in customs duties, global uncertainties could push gold prices higher. Sachdeva noted that potential policy shifts under US President Donald Trump’s administration could boost gold’s safe-haven appeal.
Market participants are also closely watching the US Federal Reserve’s upcoming policy meeting. Core inflation eased in December after months of stubborn levels, leading to speculation that the Fed may reconsider its stance on interest rate cuts. Such a move could provide additional support for gold prices.
Technical Analysis of Gold Prices
Sachdeva highlighted that gold prices are currently holding above a key support level of ₹76,000 per 10 grams. “The near-term resistance is at ₹79,200 per 10 grams. If prices decisively breach this resistance, it could pave the way for record highs. However, failure to do so may result in a downward correction,” she explained.
Key Triggers for Gold Prices
Anuj Gupta, head of commodity and currency at HDFC Securities, emphasized that both the “Trump factor” and the Union Budget 2025 will play pivotal roles in shaping gold prices in the coming weeks.
“The market is keen to understand the Trump administration’s outlook on the US economy, especially amidst the buzz of US Fed rate cuts. Domestically, rumors of customs duty hikes on nearly 20 items, including gold, could cause a significant spike in MCX gold prices. Investors should view any price dips as a buying opportunity ahead of the Union Budget 2025,” Gupta advised.
Final Thoughts
As Budget 2025 approaches, gold prices are poised for potential volatility driven by domestic policy decisions and global economic factors. Investors are encouraged to remain informed and consult financial experts before making investment decisions.
Disclaimer: The opinions and recommendations mentioned in this article are those of analysts, experts, and brokerage firms. Investors should seek professional advice tailored to their individual circumstances before making financial decisions.
