(ANI): Gold prices in India extended their gains from the previous week as the Centre raised the import duty on the yellow metal, a measure to disincentivize the imports amidst the widening trade deficit. The Centre has raised the basic import duty on the gold from 7.5 per cent to 12.5 per cent effective July 1.
India's trade deficit widened to a record $24.29 billion in May 2022 from $6.53 billion in the same month last year due to a sharp jump in the country's imports, as per data released by the Ministry of Commerce and Industry.
On Monday, the gold prices on the Multi Commodity Exchange of India rose 0.5 per cent to ₹52,158 per 10 gm.
On Friday, the gold prices saw a steep rise of over 2 per cent on the MCX.
Gold prices in the physical markets rose by over ₹900 on Friday, and by another ₹500 on Monday to ₹52,340 per 10 gm, data from India Bullion and Jewellers Association showed.
Union Finance Minister Nirmala Sitharaman has said that the customs duty on gold has been increased to discourage the high import of gold into the country.
"There has been a sudden surge in imports of gold. In the month of May, a total of 107 tonnes of gold was imported and in June also the imports have been significant. The surge in gold imports is putting pressure on the current account deficit," a statement by the Ministry of Finance said.
The gold prices are on the verge of retesting its recent high of ₹55,000-56,000 in the medium term -- by end of 2022 - on account of higher import duty, weakness in Indian rupee, likelihood of a recession in the US, said Ajay Kedia, head of Mumbai-based advisory firm Kedia Advisory.
Historically, gold, as an asset, is considered to be safe-haven as it typically manages to retain or appreciate its underlying value in times of turbulence.
"MCX gold prices are expected to trade with a positive bias for the day due to elevated inflation. It is trading above the resistance levels of ₹51,750. As long as it sustains above this level, it is likely to rally towards ₹52,200 to ₹52,400 levels in coming sessions," said brokerage house ICICI Securities in a report.