India’s gold market still follows prices set elsewhere. With limited domestic mining and no formal gold-banking framework, the country effectively accepts the London AM and PM benchmark rates as the reference for bullion traded and imported here.
Why India takes prices from abroad
Two structural features underpin this dependence:
- Minimal domestic production — India produces only a fraction of the gold it consumes, so most supply comes from imports. That leaves local prices tied to global benchmarks.
- No gold-banking system — unlike markets that have formal channels for trading, storing and lending gold, India lacks a consolidated institutional framework that could support local price discovery and hedging.
How the London AM/PM benchmarks shape local markets
The AM and PM benchmark fixes set a clearing price that is widely used by refiners, traders and central banks. For Indian participants—jewelers, bullion dealers, investors and policy makers—those benchmarks act as the starting point for setting domestic rates, import decisions and hedging strategies.
Practical impacts on consumers and businesses
- Price volatility: Global moves are quickly reflected in local retail prices, sometimes widening margins for dealers.
- Higher import bill: Reliance on imported metal exposes the economy to currency swings and freight/insurance costs.
- Limited hedging options: Without a deep domestic market for bullion finance, businesses face fewer tools to manage price risk.
- Less local price discovery: The absence of a national benchmark makes the market more reactive than proactive.
Paths to greater independence
Shifting from a price-taker to a market maker won’t happen overnight, but several measures could help:
- Boost responsible mining: Increase sustainable domestic production where feasible to narrow import dependence.
- Develop gold-banking and vaulting: Create regulated channels for storage, lending and settlement to deepen the domestic market.
- Standardize and scale custodial services: Trusted vaults and assaying can improve liquidity and attract institutional participation.
- Build local benchmarks and derivatives: Futures, ETFs and a transparent domestic price index would enable better risk management.
- Encourage digital and market infrastructure: Digital gold platforms, secure settlement and clear regulation can broaden participation.
Bottom line
India’s reliance on London benchmark prices reflects long-standing structural gaps: too little homegrown supply and few institutional channels for gold finance. Policy changes, investment in infrastructure and new market instruments can gradually reduce that dependence, but meaningful change will take time and coordination between regulators, industry and financiers.