NextFin News - India’s gold market has ground to a virtual standstill as the world’s second-largest consumer of the metal enters its fifth consecutive week of halted imports. The freeze, triggered by a combination of record-high global prices and domestic policy uncertainty, is beginning to drain local inventories and threatens to disrupt the supply chain ahead of the upcoming wedding season. According to Bloomberg, major bullion banks and trading houses have significantly scaled back or entirely paused new shipments since early April, waiting for a correction in prices that has yet to materialize.
The paralysis in the Indian market is driven by a widening gap between international benchmarks and local demand. Spot gold was trading at $4,677.845 per ounce on Wednesday, a level that has effectively priced out many Indian retail buyers. In the domestic market, 24-carat gold in Mumbai is currently quoted at approximately 145,790 rupees per 10 grams, according to data from PolicyBazaar. This price surge has forced local jewelers to rely on recycled gold—old jewelry sold back by consumers—rather than fresh imports to meet their minimal requirements.
Prithviraj Kothari, president of the India Bullion and Jewellers Association (IBJA), noted that the current environment is one of the most challenging for importers in recent memory. Kothari, who has long advocated for more stable import duty structures to prevent market volatility, indicated that the lack of fresh supply is not just a matter of price but also of anticipation. Many traders are reportedly holding off on large-scale purchases in hopes that the government might adjust the current import duty structure to alleviate the burden on the domestic industry. However, this remains a speculative position, as official signals from New Delhi have been mixed.
The impact of this import drought is visible in the "discount" at which gold is trading in India relative to international prices. Typically, Indian gold trades at a premium to cover the 15% import duty and logistics. Currently, however, local prices are trading at a significant discount as dealers struggle to find buyers even for existing stock. This inversion suggests that while supply is tightening, demand has collapsed even faster under the weight of historic prices. According to Reuters, India’s gold imports rose to $58.9 billion in 2025, but the current trajectory suggests a sharp contraction for the first half of 2026 if the standstill persists.
While the prevailing sentiment among Mumbai’s Zaveri Bazaar traders is one of caution, some analysts suggest the supply crunch may be overstated. Chirag Sheth, a principal consultant at Metals Focus, argues that the high volume of recycling provides a significant buffer for the Indian market. Sheth, known for his data-driven approach to the Indian precious metals sector, suggests that unless there is a sudden surge in seasonal demand, the current inventory levels and the flow of "old gold" could sustain the industry for several more weeks without a crisis. This perspective serves as a necessary counterpoint to the more alarmist views of a total supply failure.
The standoff between record prices and a price-sensitive consumer base is creating a structural shift in how the Indian market operates. If imports do not resume by the end of May, the industry faces a genuine risk of a supply vacuum when the next major festival cycle begins. For now, the market remains in a state of suspended animation, with the world’s most gold-hungry population forced to watch from the sidelines as the metal they prize becomes increasingly out of reach.
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