Banks divert gold supply from India to China, Turkey

Gold-supplying banks have cut back shipments to India ahead of major festivals in favour of focusing on China, Turkey, and other markets where better premiums are offered, three bank officials and two vault operators told Reuters.

That could create scarcity in the world's second-biggest market for gold, and force Indian buyers to start paying hefty premiums for supplies in the approaching peak-demand season.

Leading gold suppliers to India - which include ICBC Standard Bank, JPMorgan and Standard Chartered- usually import more gold ahead of festivals and store it in vaults. But vaults now hold less than 10 per cent of the gold they did a year ago, the sources said on Tuesday.

"Ideally a few tonnes of gold should be there in vaults during this time of the year. But now we only have a few kilos," said one Mumbai-based vault official.