U.S. demand squeezes India's gold provide, leasing charges rise to file

By
Reuters

Revealed

February 12, 2025

Gold leasing charges in India have doubled inside a month to a file excessive, following the abroad market, the place charges jumped as a consequence of a provide crunch as world banks divert the dear steel to the US, trade officers advised Reuters.

U.S. demand squeezes India’s gold provide, leasing charges rise to file – Reuters

Increased leasing charges are driving up jewelry manufacturing prices on the planet’s second-largest gold shopper and will squeeze margins of jewellers akin to Titan, Kalyan Jewellers, and Tribhovandas Bhimji Zaveri.

Gold leasing charges, which historically hover round 1.5% to three%, have greater than doubled in a month and will rise additional, Shekhar Bhandari, president and enterprise head of Kotak Mahindra Financial institution (KTKM.NS), opens new tab advised Reuters.

“Given the geopolitical uncertainty, trade war, and benefit arising out of higher futures prices on CME as compared to spot, it seems leasing rates will remain elevated for the next few months,” he stated.

International bullion banks are flying gold into the US from London, Switzerland, and Asian hubs akin to Dubai and Hong Kong to capitalise on the unusually excessive premium of U.S. gold futures over spot costs , Reuters has reported.

The push to maneuver gold to the US has lifted gold leasing charges in London, the world’s key over-the-counter (OTC) market.Banks in import-dependent India borrow gold from abroad banks and lend to jewellers. Rising borrowing prices have proportionally elevated leasing charges in India, Bhandari stated.

“Jewellers were caught off-guard by the leasing rate shooting up to a record high,” stated Amit Modak, chief government of PN Gadgil and Sons, a jeweller based mostly within the western metropolis of Pune. “Now they’re clueless about how to handle it.”

Bullion-supplying banks weren’t bringing gold into India in current weeks for the reason that market is in low cost, whereas deliveries on COMEX fetch premium, a Mumbai-based seller with a bullion importing financial institution stated.

The premium on COMEX futures over spot costs widened once more to about $28 per ounce on Monday, in contrast with reductions as excessive as $24 in India.

Vaults in key Indian cities storing gold imported by bullion banks are practically empty, as banks have moved gold to the US and aren’t all for bringing it to India given the reductions, stated one other Mumbai-based seller with a financial institution.

“Indian discounts could have risen above $100 due to negligible demand. But a supply crunch is keeping them from sky-rocketing,” he stated.