Fading Shine?

The government's decision to cut import duty on gold led to a dip in prices. But experts back the yellow metal and say the fall is temporary

- NAVNEET DUBEY

THE GOVERNMENT'S decision to slash import duty on gold from 15% to 6%, announced in the Budget, should have been a cause for celebration. But it was not.

The decision sparked a 9% fall in gold prices in July, plunging from an all-time high of ₹74,000 to ₹68,000 per 10 gm. That caused considerable heartburn among investors in gold exchange-traded funds (ETFs) and sovereign gold bonds (SGBS) since their values dropped by 5-6%. Prices have recovered slightly since then, following foreign trends, to around ₹71,500 per 10 gm on August 27.

The duty cut represents a departure from government practice of the recent past of raising rates to reduce imports, since this was one of the major sources of forex outgo and the resultant widening of the current account deficit.