Industry Steering Committee releases blueprint for spot gold exchange in India

The Committee proposes setting up of Bullion Exchanges that would provide an efficient and trusted ecosystem for trading gold and ensure the success of financialisation of gold, with an aim to improve market transparency, protect the interests of market participants and facilitate India to emerge as a price setter for gold

Post By : IJ News Service On 06 August 2019 10:58 AM

The Industry Steering Committee released its report on the need for a spot gold exchange in India as it was informed that India currently has few commodity exchanges. These operate as futures exchanges which are primarily used to hedge against gold price risk and take proprietary positions on gold price movement.

A spot exchange, on the other hand, focuses on price discovery and hence, provides the entire ecoystem around physical deliveries. India is the second largest consumer of gold globally with an annual gold demand of approximately 800-900 tonnes1 and holds an important position in the global markets. However, the domestic market is plagued by challenges such as lack of quality assurance, weak price transparency and high market fragmentation.

A gold spot exchange can address these challenges and eliminate resulting market inefficiencies. The Committee proposes setting up of Bullion Exchanges that would provide an efficient and trusted ecosystem for trading gold and ensure the success of financialisation of gold, with an aim to improve market transparency, protect the interests of market participants and facilitate India to emerge as a price setter for gold.

Catering to stakeholders across the gold ecosystem, the exchange could transform India’s gold market, enhance the wider economy and drive India’s status on the global gold stage. As such, the gold spot exchange has drawn support from policymakers, industry leaders and investors.

In February 2018, for example, the Union Budget address from India’s Finance Minister stressed that a gold spot exchange was a key government aim. On the back of extensive consultation with market participants and learnings from leading global and Indian exchanges, the report sets out a detailed blueprint for the gold spot exchange, covering the key aspects for effective delivery.

Speaking on the exchange, Somasundaram PR, Managing Director, India, World Gold Council and Chairman of Industry Steering Committee on India Gold Spot Exchange. “Establishing a Gold Spot Exchange will set the stage for an efficient, transparent and trusted gold trading ecosystem in India. The blueprint has been created in partnership with 27 industry peers, that included all of the leading industry associations and financial institutions. I want to thank each one of them for coming together for this initiative with their valuable guidance and support. The blueprint aims to lay out the pre-requisites for setting up the Gold Spot Exchange and ensuring its smooth integration into the broader financial architecture. It proposes membership structure, product specifications, an operating model, liquidity and incentives for adoption and success. Through developing an optimal trading infrastructure for gold, market participants across the value chain should realize several benefits in the short and long term.”

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