Imports suspended for five weeks! India faces a shortage in gold supply, leading to increased premiums.

Major banks in India have been unable to import gold and silver for five consecutive weeks, causing a prolonged halt that is driving up domestic prices in India and threatening supply shortages in the world's second largest precious metals market. According to traders with direct knowledge of the situation, goods have been stuck at customs since the start of the new financial year on April 1, due to administrative bottlenecks and lack of clarity in tax policies. While interruptions in the import of precious metals by Indian lending institutions are not uncommon, the current delay could lead to shortages in the local market. Jewelers are trying to replenish their stocks following the Akshaya Tritiya festival, a auspicious time for buying gold and silver. "The duration of the import stoppage is unusually long," said Sunil Kashyap, Managing Director of trader FinMet Pte Ltd, "the situation is becoming increasingly tense" as jewelers hope to take advantage of the post-festival drop in international gold prices to make purchases. Since late February, international gold prices have dropped by about 12%, driven by the energy shock from the Iran war, which has pushed up inflation and increased the risk of interest rate hikes - negative factors for interest-free gold. India relies heavily on imported gold, with banks, traders, and refineries being major buyers. However, delays in the publication of the annual list of banks eligible to import precious metals by India's Ministry of Commerce have prevented lending institutions from making purchases in the first half of April. Even after the list was released on April 17, purchases still could not proceed because customs authorities had not issued individual clearance permits before allowing goods to enter the country. Kashyap noted that since early April, the only way to import precious metals was through the India International Bullion Exchange (IIBX) located in the International Financial Technology City of Gujarat state. The exchange saw a surge in trading volume, with the highest daily trading volume in a year in April and a strong start in May. However, traders said importing through IIBX takes longer and ties up working capital. Traders said banks are still seeking clarification on whether gold and silver will be exempt from the Integrated Goods and Services Tax (IGST). These traders requested anonymity due to the sensitivity of the information. They said gold and silver have previously enjoyed exemptions, but it is still unclear whether this policy will continue. The Indian Ministry of Finance and the Customs Department did not immediately respond to requests for comments from reporters. Despite a surge in international gold prices leading to weak demand for gold, delays in imports have caused significant supply disruptions, driving up domestic gold prices in India. According to data from the World Gold Council, this week marks the first time since early February that domestic gold prices in India have exceeded international prices by more than $20 per ounce. The interruption in gold imports could have a positive impact on India's trade balance, as gold is the second largest import commodity after crude oil. Madhavi Arora, economist at Emkay Global Financial Services, said the import pause "has had a slightly positive impact on India's April trade balance and current account deficit." She noted that the share of gold in the annual import total has increased from an average of around 7% to over 9% in the fiscal year ending in March 2026.