Gold consumption set to surge this festive season following historic tariff cuts

Gold consumption: India's gold consumption is likely to witness its biggest increase this year as fueled by the lowest import tariff in a decade and the approaching festival and wedding seasons. The country, the second-biggest consumer of gold globally, imported a record $10.1 billion in August, more than doubling the amount from the same month last year.

The imports of gold buy have increased since the Indian government reduced the import tax on gold and gold dore, an alloy of gold and other metals, by 9 per cent late last month. The present duties stand at 6 per cent for gold and 5.35 percent on gold dore-the lowest that have been since June 2013. Finance Minister Nirmala Sitharaman said that it will "enhance domestic value addition in gold and precious metal jewelry."

As the festival season is set to start from October 3, and the main Hindu festival, Diwali, takes place on November 1, jewelry stores are going to gain customers. Festival season traditionally sets off an increase in gold purchases as the yellow metal is considered an auspicious piece and the people are keen to offer this metal as gifts at wedding ceremonies and festivals. Retail gold prices eased so far by about 4,000 rupees or $47.8 from the cut as it has been sold at around 70,000 rupees for 24-carat gold per 10 grams.

There will be peak interest around Dhanteras, October 29-said to be an exceptionally auspicious day for buying gold.

According to industry analysts, the gold sales will be able to sustain their current momentum with the deferral purchases now taking shape. Crisil Ratings recently released a note for view revenue to be up 22 per cent to 25 per cent for organized gold jewellery retailers during the current year, mainly due to reduction in import duty.

Retail gold prices are creeping upwards slowly for the festive season, but as of now, it remains around 78,000 rupees for 10 grams of 24-carat gold. Meanwhile, even at these hikes, experts believe consumer demand would have been strong since buyers awaited the festive rush.