India Set to Receive Country’s First Physical Gold Exchange

India is set to introduce a physical gold exchange that would bring about an improvement in the gold pricing and possibly lead to huge cash transactions. This physical exchange is to be launched by the India Bullion and Jewellers Association, a Mumbai based bullion association. The concept of launching the physical exchange was to bring about an improvement in the gold market and introduce a sense of transparency. India, being the second largest consumer of the precious yellow metal will benefit greatly from such an initiative.

IBJA is a group consisting of gold dealers, traders and jewellers from across the country who are looking forward to a physical exchange that would lead to better pricing. The idea of setting up a dedicated physical exchange was also reflected by Shaktikanta Das, the secretary of Economic Affairs. The benefits of a dedicated Physical Gold Exchange is that it could not only lead to standard pricing of gold but open up possibilities of huge cash transactions along with allowing jewellers, traders, banks and consumers to deal in gold and bring a sense of transparency into the market

Ketan Shroff, an IBJA spokesman has said that the dedicated physical gold exchange is planned to be launched in 6 months with discussions of structure and talks about ownership already under way. The exchange will be incorporated initially with two or three gold and silver delivery centres. The exchange will assist the government in monitoring the gold trade.

Presently Gold futures contracts are being provided by two entities in the country, the Multi Commodity Exchange (MCX) and the National Commodity and Derivatives Exchange (NCDEX) but a dedicated platform for exchange of gold does not exist. The push for a dedicated exchange comes after the launch of the gold monetisation schemes and sovereign bond schemes launched last month that was designed to mobilize the country’s existing gold hoard and reduce the import of gold which has been taking its toll on trade deficit.

The setting up of a physical exchange will greatly benefit jewellers, retailers and refiners. They will now be able to trade over regulated platforms. The demand and supply being transparent on these platforms will signify the end of jewellers having to pay heavy premiums. Banks who are the main importers of gold will also benefit from this exchange as they are currently denied to trade on Indian commodities exchange offering futures contracts. The practice of a dedicated physical exchange for gold is already in place in China where all domestic and imported gold has to be bought and sold at the exchange.

In India, IBJA is looking for partners to launch the exchange and are on the lookout for partners who will be an anchor investor or a promoter holding no more than 26% stake in a commodity exchange

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