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    India’s ‘unusual move’ on gold buying: macro and project risk notes for engineers

    May 12, 2026|

    Reviewed by Tom Sullivan

    India’s ‘unusual move’ on gold buying: macro and project risk notes for engineers

    First reported on MINING.com

    30 Second Briefing

    India’s government is urging citizens to halt gold jewellery purchases for 12 months to protect foreign-exchange reserves as Middle East conflict-driven oil prices widen the trade deficit and pressure the rupee. Jewellery demand reached about 440 tonnes in 2025, with a further 280 tonnes in bars and coins, and gold already makes up roughly 17% of India’s FX reserves, so even partial compliance could soften physical premiums, lift London vault inventories and marginally cap global prices. Enforcement is unclear, with past curbs pushing buying into recycling and smuggling rather than cutting total consumption.

    Technical Brief

    • Jewellery consumption of 440 tonnes in 2025 equated to roughly one‑third of global jewellery demand.
    • Bar and coin purchases added another 280 tonnes of Indian demand on top of jewellery volumes.
    • Gold already constitutes about 17% of India’s foreign‑exchange reserves, according to Wall Street Journal data.
    • BMO analysts link Modi’s appeal to recent administrative delays in granting gold import licences to Indian banks.
    • BMO also reports rising London vault inventories, tied to weaker Indian imports, higher US exports and some central‑bank selling.
    • Shares of major listed Indian jewellery retailers dropped sharply on the announcement, signalling expectations of lower near‑term sales.
    • Historically, prior Indian import curbs have diverted demand into recycling and smuggling rather than reducing total consumption.
    • With India acting as a price‑sensitive physical buyer, its policy‑driven withdrawal removes a key stabilising demand response to price dips.

    Our Take

    With India’s jewellery and bar/coin demand together accounting for well over 700 tonnes in 2025, any policy move to curb gold buying materially affects physical offtake in a market that our database shows has already been whipsawed by price spikes above $5,200/oz and sharp margin-call selloffs this year.

    BMO Capital Markets, cited here, has recently highlighted how $100+/bbl oil can lift gold cash costs; India’s simultaneous exposure to oil and gold in its external accounts means Iran-related oil price shocks tighten the same forex channel that finances bullion imports.

    Gold already makes up 17% of India’s FX reserves, and in our coverage that is at the upper end among large emerging markets, which suggests the authorities have less room to lean on additional bullion accumulation as a buffer when oil-linked outflows rise.

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    Prepared by collating external sources, AI-assisted tools, and Geomechanics.io’s proprietary mining database, then reviewed for technical accuracy & edited by our geotechnical team.

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