Exclusive: Banks divert gold supplies from India to China and Turkey

MUMBAI (Reuters) – Gold-supplying banks have reduced shipments to India ahead of major festivals in favor of focusing on China, Turkey and other markets with better premiums, three bank officials and two vault operators told Reuters.

That could lead to a scarcity in the world’s second largest gold market, and force Indian buyers to start paying huge premiums for supplies as peak demand season approaches.

Major Gold Suppliers to India – Including ICBC Standard Bank, JPMorgan and Standard Chartered (STAN.L) Usually more gold is imported before the festivals and stored in vaults.

On Tuesday, sources said, the vaults now contain less than 10% of the gold they held a year ago.

“Ideally, there should be a few tons of gold in vaults during this time of the year. But now we only have a few kilos,” said a vaults official in Mumbai.

JPMorgan, ICBC and Standard Chartered declined to comment.

In India, premiums on the international gold price standard have fallen to $1 to $2 an ounce, from about $4 at the same time last year.

Premiums have fallen sharply due to a now-closed loophole that has led some Indian trading houses to import gold as low-tariff platinum bullion, allowing some to offer gold at a discount, Chanda Venkatesh, managing director of Hyderabad-based bullion dealer CapsGold, said.

This contrasts with insurance premiums of $20-45 offered in China, the largest consumer, buoyed by pent-up demand after COVID-related lockdowns, and $80 in Turkey, where gold imports rose sharply on the back of rampant inflation.

“Banks will sell where they will get a higher price,” said an official in Mumbai with a leading bullion supplier.

“Buyers in China and Turkey are currently 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 because of the bank’s policy.

India’s gold imports in September fell 30 percent from a year ago to 68 tons, while Turkey’s gold imports rose by 543 percent. China’s net gold imports via Hong Kong jumped nearly 40% to the highest level in more than four years in August.

Indians will celebrate Dussehra, Diwali and Danteras in October, when buying gold is considered auspicious. After these festivals, the wedding season begins, which is one of the biggest drivers of gold buying in India.

A Mumbai-based bullion trader who owns a bank said stocks with thin treasuries could force Indian buyers to pay huge premiums to secure supplies.

Rajendra Jadhav reports. Additional reporting by Urban Varghese in Bengaluru. Editing by Jean Harvey

Our criteria: Thomson Reuters Trust Principles.