Exclusive: Banks divert gold supply from India to China, Turkey

Exclusive: Banks divert gold supply from India to China, Turkey
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MUMBAI, Oct 4 (Reuters) – Banks dealing in gold supplies have reduced shipments to India ahead of key festivals in favor of focusing on China, Turkey and other markets where better rewards are offered, three bank officials and two cashiers told Reuters.

That could create a shortage in the world’s second-largest gold market, forcing Indian buyers to pay huge premiums for supplies in the coming peak demand season.

India’s leading gold suppliers include ICBC Standard Bank, JPMorgan and Standard Chartered (STAN.L) – usually import more gold before festivals and store it in warehouses.

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Sources said on Tuesday that warehouses now hold less than 10% of the gold they acquired a year ago.

“Ideally, at this time of the year, there should be several tonnes of gold in the vaults. But now we have only a few kilos,” said a Mumbai-based warehouse official.

JPMorgan, ICBC and Standard Chartered declined to comment.

Premiums on the international gold price index in India have fallen to $1-2 per ounce against around $4 this time last year.

Closed loopholes pushed premiums down sharply, prompting some Indian trading houses. import gold at low tariff A platinum alloy that allows some to even offer gold at a discount, said Chanda Venkatesh, managing director of CapsGold, a Hyderabad-based bullion trader.

That contrasts with premiums of $20-$45 on offer in top consumer China, which has been helped by the release of pent-up demand after COVID-related lockdowns, and $80 in Turkey, where gold is Imports have increased dramatically in the background rampant inflation.

“Banks will sell where they will get a higher price,” said a Mumbai-based official at a leading bullion supply bank.

“Buyers in China and Turkey are currently paying a very high premium. When we equate it with the Indian market, there is no comparison,” said the official, who did not want to be named due to the bank’s policy.

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

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

Thin warehouse stocks could force Indian buyers to pay huge premiums to secure supplies, said a bullion dealer working with a Mumbai-based bank.

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Reporting by Rajendra Jadhav; Additional reporting by Arpan Varghese in Bangalore; Edited by Jan Harvey

Our standards: Thomson Reuters Trust Principles.

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