Gold Supplies in India Disappear Despite Continued Record Premiums

I first reported on record high gold premiums in India a couple of weeks ago. Since then, the story has become even more interesting as Reuters reports that gold supplies have completely dried up just ahead of major gold buying festivals and despite continued record premiums. While it is clear that Indians are finding a way to buy gold anyway via black markets, this is still a very interesting story to keep an eye on.

More from Reuters:

India has imposed several restrictions on imports of gold, the biggest non-essential import item, to curb a record trade deficit. Gold imports in September fell to 7 tonnes from 162 tonnes in May.

Of course, if additional demand wasn’t being met via black markets the price of gold would be far lower than it is.

“Still gold is not available, and they are charging $120-130 (an ounce) of premiums,” said Bachhraj Bamalwa, director with the All India Gems and Jewellery Trade Federation.

Most of the demand is being met by recycled gold or through unofficial or illegal supply channels, traders said.

“Sales have dropped by 50 percent… and everything is happening according to the wishes of the government,” said Harshad Ajmera, proprietor of Kolkata-based wholesaler JJ Gold House.

I’m sure this will all work out just as the government anticipates…

Full article here.

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  1. Dubai Gold & Commodities Exchange plans to list a spot gold contract in the second quarter of next year as demand for the metal in the region increases.

    The bourse, which offers gold and silver futures, is talking to local merchants and industry organizations and aims to get regulatory approval for the product by early 2014, said Chief Executive Officer Gary Anderson. Demand for bullion in Dubai expanded eightfold in the last six to 10 years, he said.

    Dubai accounts for about 25 percent of global physical gold trade and the United Arab Emirates will grow as a precious-metals trading hub partly because of its location near the largest consuming nations, according to the Dubai Multi Commodities Centre, which owns a majority stake in the DGCX. Gold, set for the first annual decline in 13 years, advanced 14 percent since reaching a 34-month low in June as lower prices spurred demand for jewelry, bars and coins in Asia.

  2. I was living in India… you cannot stop Indian from buying gold. And, you know, they have a strong sense of business, they are merchants, in the purest sense of the world… smuggling IS business 😉 and Police is VERY corrupt. I would like to know the volume of the smuggling. It would be really astonishing,

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