India’s Titan expects to pay more to source gold from bullion banks as supply shrinks

Indian jeweller Titan will likely have to pay higher interest rates to lease gold from bullion banks, which have increased shipments to the US in search of bigger profits, tightening supply in other regions, the company said on Wednesday.

Jewellers such as Titan, which owns the Tanishq and CaratLane brands, lease gold from bullion banks, which import the metal, to avoid inventory risks due to fluctuation in prices of the yellow metal.

Global bullion banks are flying gold into the US from trading hubs catering to Asian consumers to capitalize on the unusually high premium that US gold futures are enjoying over spot prices, Reuters reported this week.

Worries over US import tariffs planned by President Donald Trump have driven gold delivered to Comex-approved warehouses to highest since July 2022.

“Gold moved from London market to Comex because of anticipated tariffs. Suddenly, there is gold shortage in the last one week, and gold metal loan interest rates are also fluid,” Ajoy Chawla, CEO of Titan’s Jewellery division said in an investor call.

The initial indications are that the rates on gold leasing could go up, Titan said without giving the quantum of the rise it expects to see from current 1.5%-2%.

“We need to wait for a month or two to understand how the supply and therefore the pricing will play out,” said Vijay Govindarajan, the company’s associate vice president - Finance.

Titan also said it is difficult to predict fourth-quarter growth due to gold prices hitting an all-time peak amid fears of a new US-China trade war.

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It did not specify which metric of growth it was referring to.

The company reported third-quarter profit above estimates after market hours on Tuesday.

It also said it absorbed the full impact of inventory losses from the Indian government cutting gold import taxes in July 2024, which weighed on its second-quarter profit despite higher sales.

Titan already held inventory before the cut in import taxes, reducing the average value of its stock. It also had to sell the old inventory at lower market prices following the cut.

“We hope that we are able to sustain some kind of growth rates that we have seen between all the quarters put together, or at least second and third-quarter,” Chawla said, adding that customers might buy gold if prices don’t fall.