In July, the government cut the import duty on gold from 15% to 6%, helping to ease the pressure of record-high prices and reinvigorating the domestic market ahead of the wedding and festive season.

Jewellers across the country are preparing for increased sales, with some already reporting a 30% rise. Gold is traditionally purchased in India as jewellery, bars, and coins, serving both as an investment and a secure form of wealth storage for those without access to formal banking.

The World Gold Council now estimates that demand in the second half of 2024 could rise by at least 50 tonnes, pushing overall consumption for the year to 850 tonnes. The outlook for the final quarter of the year is particularly strong, with many predicting it will be a period of significant gold consumption.

Impact on Smuggling and Pricing

In addition to boosting demand, the import duty cut is aimed at reducing the prevalence of gold smuggling. With gold prices previously inflated by the high duty, illegal smuggling had become increasingly common. The reduced tax makes smuggling less profitable, as the price difference between legal and illegal gold narrows.

Despite the positive market response, there are concerns that external factors, such as geopolitical tensions and changes in U.S. monetary policy, could drive up gold prices. However, for now, the tax reduction is seen as a timely measure to support India’s organized gold trade and meet growing demand.