According to a report published by the news agency Reuters and based on information from three bank officials and two vault operators, gold-supplying banks have reduced shipments to India ahead of major festivals in favor of focusing on China, Turkey, and other markets with higher premiums.
This could lead to scarcity in the world’s second-largest gold market, forcing Indian buyers to pay exorbitant premiums for supplies during the upcoming peak-demand season.
Leading gold suppliers to India, such as ICBC Standard Bank, JPMorgan, and Standard Chartered, typically import more gold and store it in vaults ahead of festivals.
However, vaults now hold less than 10% of the gold they did a year ago, according to sources on Tuesday.
“Ideally a few tonnes of gold should be there in vaults during this time of the year. But now we only have a few kilos,” said one Mumbai-based vault official.
There were no comments on the issue from JPMorgan, ICBC and Standard Chartered.
Premiums over the international gold price benchmark in India have fallen to $1-$2 per ounce, down from around $4 this time last year.
According to Chanda Venkatesh, managing director of Hyderabad-based bullion merchant CapsGold, premiums were driven sharply lower by a now-closed loophole that allowed some Indian trading houses to import gold as lower-tariff platinum alloy, allowing some to even offer gold at a discount.
This contrasts with premiums of $20-45 in top consumer China, aided by pent-up demand released following COVID-related lockdowns, and $80 in Turkey, where gold imports have risen sharply against a backdrop of rampant inflation.
“Banks will sell where they will get a higher price,” said a Mumbai-based official with a leading bullion-supplying bank.
“Buyers in China and Turkey are right now paying a very high premium. There is no comparison when we equate it with the Indian market,” said the official, who declined to be named due to the bank’s policy.
India’s gold imports fell 30 per cent year on year to 68 tonnes in September, while Turkish gold imports increased 543 per cent. In August, China’s net gold imports through Hong Kong increased by nearly 40 per cent to a more than four-year high.
In October, Indians will celebrate Dussehra, Diwali, and Dhanteras, when purchasing gold is considered auspicious. Following these festivals, the wedding season begins, which is one of the most important drivers of gold purchases in India.
According to a Mumbai-based bullion dealer with a bank, thin vault stocks may force Indian buyers to pay exorbitant premiums to secure supplies.
(Adapted from Reuters.com)