Finance Minister Nirmala Sitharaman today proposed increase in import duty on gold and other precious metal to 12.5%, from 10%, sending domestic gold prices sharply higher. "It is proposed to increase custom duty on gold and other precious metals from 10% to 12.5%," Finance Minister Nirmala Sitharaman said in her Budget speech. On MCX, gold futures contracts for August delivery, surged over 2%, or 714, to 34,931. Similarly, the the October futures jumped over 2.2% to 35,204.

In the spot market, gold prices also showed a similar trend. Gold prices zoomed 590 to 34,800 per 10 gram in Delhi. In the national capital, gold of 99.9% and 99.5% purity surged by 590 each to 34,800 and 34,630 per 10 gram, respectively, according to the All India Sarafa Association.

"The increase of custom duty has led to rise in gold prices," said Surendra Jain, Vice President of All India Sarafa Association.

In Delhi, silver ready prices declined by 80 to 38,500 per kg, while weekly-based delivery gained 75 to 37,225 per kg. Prices of silver coins held flat at 80,000 for buying and 81,000 for selling of 100 pieces.

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Budget 2019 | Gold to get costlier, customs go up from 10% to 12.5%

The decision came to increase customs duty on gold comes at a time when the domestic jewellery industry was demanding a cut in the import duty. India is one of the largest gold importers in the world, and the imports mainly take care of demand from the jewellery sector. In volume terms, India imported 982 tonnes of the yellow metal in the previous financial year.

In 2013, the the government had raised import taxes on gold to 10% in a series of hikes as policymakers attempted to narrow a gaping current account deficit and arrest a decline in the rupee.

In global markets, gold prices edged lower as investors awaited the release of US jobs data, which could offer guidance on the U.S. Federal Reserve's upcoming interest rate decisions.

Spot gold was down 0.1% at $1,414.15 per ounce. (With Agency Inputs)