Indian gold demand is under pressure again this week after bullion dealers' accounts were reported frozen at Axis Bank following an investigation into transactions post-demonetization.
Local sources and media reports said up to 50 traders have had their accounts frozen at India's Axis Bank, a leading bank used by the bullion and jewelry industry for importing and exporting gold.
Axis Bank did not return calls or emails requesting comment Wednesday.
"There is no movement, and very little information from the bank on when they will be re-activated," said a dealer Wednesday who has had his accounts frozen at the bank.
"There is a huge level of uncertainty in the industry, for consumers, and what officials may do next," he added.
Following a recent crackdown on India's "shadow economy," the authorities have been looking closely at the gold industry as a source of wealth storage outside official channels.
The decision to recall up to 80% of its currency overnight at the beginning of November, redenominating all its larger notes, caught markets completely by surprise.
Yet following a sharp, but temporary spike in demand as investors transferred cash to gold, the shortage of cash has seen gold demand fall back to levels far below typical for this time of year, the Indian wedding season.
"A number of bullion dealers are unable to buy and demand is very low this week," said a second Delhi-based dealer.
Discounts to the international price have been reported as wide as $10/oz Wednesday from $3-$4/oz Tuesday. Monday was a public holiday in India.
