Gold supplier banks have cut shipments to India ahead of key festivals in favor of focusing on China, Turkey and other markets where better premiums are on offer, three bank officials and two vault operators told Reuters.
That could create a shortage in the world’s second-largest gold market, and force Indian buyers to start paying a steep premium for supplies in the approaching peak demand season.
Top gold suppliers to India — including ICBC Standard Bank, JPMorgan and Standard Chartered — usually import more gold ahead of the festival and store it in vaults. But the vaults now hold less than 10 percent of the gold they held a year ago, the source said on Tuesday.
“Several tonnes of gold should ideally be in the vault by this time of the year. But now we have only a few kilos,” said a Mumbai-based vault official. JPMorgan, ICBC and Standard Chartered declined to comment.
In India, the premium over the international gold price benchmark has slipped to $1-$2 an ounce, compared to around $4 this time last year. Premiums were driven sharply lower by a now-closed loophole that led some Indian trading houses to import gold as a low-tariff platinum alloy, even allowing some to offer gold at a discount, Chanda Venkatesh, managing director of Hyderabad-based bullion trader CapsGold, said.
That contrasts with the $20-45 premium offered in top consumer China, helped by pent-up demand released after a Covid-related shutdown, 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 supplier bank. Buyers in China and Turkey are now paying a very high premium. There is no comparison when we compare it with the Indian market,” said the official who declined to be named due to the bank’s policy.
India’s gold imports in September fell 30 percent compared to a year ago to 68 tons, while Turkey’s gold imports jumped 543 percent. China’s net gold imports through Hong Kong jumped nearly 40 percent to a more than four-year high in August.
Indians will celebrate Dussehra, Diwali and Dhanteras in October when buying gold is considered lucky. After this festival, the wedding season begins, which is one of the biggest drivers of gold purchases in India. Thin vault stocks could force Indian buyers to pay a high premium for supplies, said a Mumbai-based bullion trader with a bank.