India, the World Gold Council estimates, is the biggest consumer of gold accounting for 746 tonnes in 2010, nearly twice the second largest market of China which accounted for 400 tonnes. The Council also estimates that the southern States of India, particularly Tamil Nadu, accounted for a significant portion of the market.

While the clamour for jewellery and other gold ornaments, which had become rather an essential feature in all family occasions across religions, had driven this consumption, the trend seems to be changing. From being viewed at as a showpiece, gold has now become an investment option, resulting in sales shifting towards bars and coins and away from ornaments.

M. Balasubramanian, president of Tamil Nadu Jewellers’ Federation, an apex body for the sector comprising over 80 jewellers’ associations in the State, told The Hindu on Thursday that buying gold bars and biscuits spared the customer the costs of wastage, design and making charges. While earlier, jewellery and bullion sales were in the ratio of 90 per cent and 10 per cent respectively, the present Deepavali season has seen sales almost evenly divided between the two.

This year, the gold sales had come down by at least 15 per cent in the southern region, mainly due to economic slowdown.

Further, gold imports had also come down by 16 per cent across the nation this year because of the increase in customs duty from 1 per cent to 4 per cent. This had resulted in a duty charge of almost Rs. 1.2 lakh for a gold bar weighing one kilogram, and worth around Rs. 30 lakh. Even globally, gold imports were down by 13 per cent due to worldwide economic recession.

Value appreciation

A major reason for customer’s preference for investing in gold, M.K.V.K.R. Prabaharan, vice-president of the federation said, was that it appreciated almost 30 per cent every year.

While consumer products had a huge market in tier I cities, it was the tier II and III cites that drove up sales in the gold sector. However the customers’ preference had changed a lot. Contemporary jewellery — modern design and light, was selling more, pushing the traditional pieces that weigh a lot to the backseat. Mr. Prabaharan added that the smaller shops in this sector were being squeezed by the bigger players who were cornering a huge chunk of the market and by the government rules and regulations that were stifling them.