Five-Week Gold Import Freeze Squeezes Supply in India's $55 Billion Bullion Market

Indian banks have now gone five consecutive weeks without importing gold and silver, an unusually prolonged standstill that is tightening domestic supply and driving up prices in the world's second-largest bullion market. The halt—linked to regulatory complications surrounding payment terms for overseas suppliers—has created a bottleneck at a critical time for Indian jewelers and manufacturers ahead of the festive season, when gold demand typically peaks.

Sources familiar with the matter say correspondent banking relationships and compliance requirements from the Reserve Bank of India have complicated efforts to settle transactions with international suppliers. Normally, import disruptions resolve within days, but the current standstill has persisted far longer than industry norms. India's gold imports, which topped $55 billion annually in recent years, flow primarily through a handful of designated banks authorized to handle precious metals transactions. When those channels seize up, the effects ripple quickly through the supply chain. Dealers in major trading hubs report narrowing premiums for physical metal, a telltale sign of tightening available supply.

The disruption raises the risk of a supply crunch if normal import channels do not resume soon. Domestic gold prices have already climbed in response to the constrained flow, pressuring margins for jewelers who depend on steady access to physical inventory. Analysts warn that if the standstill extends further, retailers may face shortages heading into peak demand periods. The episode also underscores the vulnerability of even large, liquid commodity markets to breakdowns in payment infrastructure and regulatory friction.