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, Kalyan Jewellers, and Tribhovandas Bhimji Zaveri.
Gold leasing rates, which traditionally hover around 1.5 per cent to 3pc, have more than doubled in a month and could rise further, Shekhar Bhandari, president and business head of Kotak Mahindra Bank 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 US gold futures over spot prices, 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.
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