U.S. demand squeezes India's gold supply, leasing rates rise to record

Tribhovandas Bhimji Zaveri

11/02/2025 10:47

By Rajendra Jadhav
       MUMBAI, Feb 11 (Reuters) - Gold leasing rates in India
have doubled within a month to a record high, following the
overseas market, where rates jumped due to a supply crunch as
global banks divert the precious metal to the United States,
industry officials told Reuters.
    Higher leasing rates are driving up jewellery production
costs in the world's second-largest gold consumer and could
squeeze margins of jewellers such as Titan  TITN.NS , Kalyan
Jewellers  KALN.NS , and Tribhovandas Bhimji Zaveri  TBZL.NS .
    Gold leasing rates, which traditionally hover around 1.5% to
3%, have more than doubled in a month and could rise further,
Shekhar Bhandari, president and business head of Kotak Mahindra
Bank  KTKM.NS  told 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 said.
    Global bullion banks are flying gold into the United States
from London, Switzerland, and Asian hubs such as Dubai and Hong
Kong to capitalise on the unusually high premium of U.S. gold
futures  GCcv1  over spot prices  XAU= , Reuters has reported.
    The rush to move gold to the United States has lifted gold
leasing rates in London, the world's key over-the-counter (OTC)
market.
    Banks in import-dependent India borrow gold from overseas
banks and lend to jewellers. Rising borrowing costs have
proportionally increased leasing rates in India, Bhandari said.
    "Jewellers were caught off-guard by the leasing rate
shooting up to a record high," said Amit Modak, chief executive
of PN Gadgil and Sons, a jeweller based in the western city of
Pune. "Now they're clueless about how to handle it."
    Bullion-supplying banks were not bringing gold into India in
recent weeks since the market is in discount, while deliveries
on COMEX fetch premium, a Mumbai-based dealer with a bullion
importing bank said.
    The premium on COMEX futures over spot prices widened again
to about $28 per ounce on Monday, compared with discounts as
high as $24 in India.
    Vaults in key Indian cities storing gold imported by bullion
banks are nearly empty, as banks have moved gold to the United
States and are not interested in bringing it to India given the
discounts, said another Mumbai-based dealer with a bank.
    "Indian discounts could have risen above $100 due to
negligible demand. But a supply crunch is keeping them from
sky-rocketing," he said. 

 (Reporting by Rajendra Jadhav; Additional reporting by Siddhi
Nayak; Editing by Clarence Fernandez)
 ((rajendra.jadhav@thomsonreuters.com; Reuters Messaging:
x.com/Rajendra1857))