the metal sent Indian gold premiums to more than $100 an ounce over London prices this month when demand far exceeded supply due to the Dussehra festival, one of several connected with harvests and invoking Lakshmi, the goddess of wealth.
The related festivals of Diwali and Dhanteras fall in the first week of November.
"New imports for domestic use could start in the next 10-15 days, which could coincide with Diwali and Dhanteras. But despite new imports, the supply situation will be very tight and premiums may even go up to $150," said Bachhraj Bamalwa, director at the All India Gems and Jewellery Trade Federation.
Premiums in other parts of Asia such as Hong Kong and Singapore were stable at less than $2 an ounce.
Wholesaler Arora, who works for NIBR Bullion, said some banks had begun accepting orders for delivery in 10 days.
But the supply shortage would persist as long as the government rules remained in force, Arora said. "Banks are giving stock only to big suppliers, so smaller jewellers are suffering due to this."
One side effect of the government measure will do nothing to improve the trade figures: in the six months from April, gold jewellery exports more than halved to $3.34 billion from $8 billion in the same period a year earlier.
SHOOING AWAY CUSTOMERS
India was the world's biggest gold buyer in 2012 but could lose the top spot to China this year after the clampdown.
Demand, nevertheless, is expected to stay strong, with the World Gold Council forecasting India would need up to 1,000 tonnes for the year after 864 tonnes in 2012.
Many suppliers are turning to smuggled gold, especially as that also avoids the 10 percent import duty. As a result, even smuggled gold commands a premium of $50 an ounce above London prices, according to the Bombay Bullion Association (BBA).
"I'm not getting supplies for exports, forget about for domestic use," said Mehul Choksi, chairman of jewellery retailer Gitanjali Gems, one of the largest branded jewellery retailers in the world. "Premiums are already up and they could go up even further. Some demand is being met by supplies through unofficial channels."
"As supply is very scarce, we have moved to diamond jewellery, which uses less gold content," Choksi added.
The desperate search for gold has even prompted digging under a ruined palace after a Hindu village sage dreamt that 1,000 tonnes might be buried there.
Meanwhile, those who are waiting for official gold imports