India's gold import restrictions have sparked panic buying, Goldman Sachs: Gold prices could still rise to $5400 by the end of the year.

The more restrictions, the more panic buying. According to the latest report from the Economic Times of India, the Indian government recently implemented a series of restrictions on gold imports, which not only failed to suppress demand but instead sparked panic buying of jewelry for weddings across the country. At the same time, Goldman Sachs precious metals analyst Lina Thomas reiterated that the year-end target price for gold remains unchanged at $5400 per ounce. The reason behind this is the sharp depreciation of the Indian Rupee. Due to the impact on energy supply in the Middle East, India, as the world's third-largest oil importing country, was hit hard, causing a large outflow of foreign exchange and leading to the Rupee falling to historic lows. The Reserve Bank of India was forced to intervene by selling US dollars to support the currency. To further stabilize the exchange rate, the Modi government first urged people to reduce their purchases of gold and foreign travel, then significantly increased the import duties on gold, followed by directly restricting the amount of gold imports, and warned that more emergency measures are being studied to protect foreign exchange reserves. The results backfired. "Sales up 15% to 20% in two days": Panic buying sweeps across India According to the Economic Times of India, the wave of panic buying of gold has spread throughout India. Jewelry retailers said that consumers are worried that policies will continue to tighten, prompting them to make purchases before the start of the wedding season in June. The core logic driving this wave of buying is simple: buy now because it may become more expensive later, or even unavailable. Rajesh Rokde, Chairman of the All India Gems and Jewellery Domestic Council, said: "In the past two days, sales of wedding jewelry have been 15% to 20% higher than the daily average." The scope of the buying frenzy has exceeded immediate wedding demand. Varghese Alukkas, Managing Director of Jos Alukkas, which has 65 stores, said: "Some people are even buying gold in advance for weddings in November and December because they are worried that the government may prohibit the purchase of gold." In Mumbai's largest gold jewelry market, Zaveri Bazaar, traders estimated a 20% increase in sales over the past two days. Suvankar Sen, Managing Director and CEO of Senco Gold, described the prevailing sentiment in the market: "Various rumors are flying around. Some say import duties will increase, some say the GST will be raised from the current 3%. This uncertainty has prompted consumers to buy wedding jewelry in droves." He added that about 60% of the purchases are related to the upcoming wedding season, with the rest being stocked up early for winter events. Surendra Mehta, National Secretary of the Indian Bullion and Jewellers Association (IBJA), was more direct: "Both B2B and B2C transactions are taking place, panic buying is happening in the market. Gold is deeply rooted in Indian culture, consumers buy wedding jewelry to avoid possible increases in taxes or restrictions on cash purchases in the future." Goldman Sachs: Year-end target $5400, but caution in the short term While there is a frenzy of buying on the retail side, Goldman Sachs precious metals analyst Lina Thomas reiterated her long-term bullish stance on gold in her latest report, maintaining a year-end target price of $5400 per ounce by 2026. However, the analyst pointed out that the pace of central bank buying has slowed - albeit less than previously expected. Goldman's updated 12-month moving average (12MMA) forecast model shows that the average monthly gold purchases by central banks in March of this year was 50 tons, compared to the model's earlier estimate of 29 tons. Lina Thomas expects central bank gold purchases to rebound throughout 2026, reaching an average of 60 tons per month. Thomas's logic is that central bank surveys show strong underlying demand for gold in various countries, and recent geopolitical developments will further strengthen the diversification appetite of central banks and private investors. But Thomas also provided short-term risk warnings. The report pointed out that gold is highly liquid, and once private investors face liquidity pressure - such as in a backdrop of rising interest rates and weakening growth expectations leading to a stock market decline - gold is often one of the first assets to be sold. In other words, gold may come under pressure in the short term, but Goldman's outlook for the year-end direction remains unchanged. The stricter the restrictions, the more active the gray channels Historical patterns show that government attempts to control capital outflows through restrictions on precious metals often have the opposite effect: once the formal market is restricted, demand shifts to informal channels, leading to an increase in gold smuggling activities. The analysis also mentioned that if traditional channels for buying gold and silver continue to be blocked, India may eventually follow the path of other developing countries under financial suppression, turning to alternative currencies such as Bitcoin and stablecoins for value preservation. This article was reprinted from "Wall Street See News", author: Long Yue; GMTEight editor: Yan Wencai.