Gold Leasing Rates Skyrocket Amid Global Supply Crunch

In India, gold leasing rates have doubled within a month, reaching a record high due to global supply constraints. The scarcity, partly caused by banks moving gold to the U.S., is increasing costs for jewellers and affecting their profit margins. Experts predict elevated rates to persist.

Gold leasing rates in India have surged to unprecedented levels within a month, influenced by the global market that experienced a rate hike due to supply shortages as international banks reroute the precious metal to the United States. This information was shared by industry representatives with Reuters.

The significant increase in leasing costs is expected to elevate the expenses of jewellery production in India, the world’s second-largest gold consumer. This rise could potentially compress the profit margins for jewellers such as Titan, Kalyan Jewellers, and Tribhovandas Bhimji Zaveri. Traditionally fluctuating between 1.5% and 3%, these rates have recently more than doubled, with possibilities of further escalation, according to Shekhar Bhandari of Kotak Mahindra Bank.

The geopolitical uncertainties and benefits from higher futures prices on CME, compared to spot, suggest that these elevated leasing rates might prevail for the upcoming months. The surge in U.S. gold futures and the movement of gold from London, Switzerland, and Asian gateways to the U.S. has notably impacted the leasing rates in London, a central over-the-counter market, leading to increased costs in India as well.