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Indian traders and jewellers plan country physical gold exchange

Wednesday, December 9, 2015

India aims to open its first gold exchange in the New Year, which will help the government monitor gold trading in what is the precious metal’s second biggest market.

Gold dealers and jewellers in the India Bullion and Jewellers Association (IBJA) plan to launch the physical gold trading exchange within the next six months; once its structure and ownership details have been ironed out. China, the world’s biggest global gold buyer, already has a similar exchange in operation.

The new exchange would allow those involved in the Indian gold markets to trade using a regulated platform in a transparent manner.

Mumbai Jewellers Association vice-president, Kumar Jain, told Reuters: “There is a need for an exchange that will cater to small jewellers' demand.

“Sometimes we need to pay hefty premiums. That won't happen as demand-supply will become transparent on [an] exchange platform.”

In China, all gold, whether it is imported into the country or produced within China, must be traded through its official gold exchange. India is hoping a similar set-up for physical gold bullion and silver trading will lead to standardised gold pricing across the country and allow the government to keep tabs on gold trading, which often involves large cash sums.

The Indian government has already monetised gold and introduced sovereign bond schemes as part of efforts to stop people hoarding the precious metal. It hopes the move will result in greater availability of domestic gold in the market and reduce the amount that the country imports.

India already has an exchange dedicated to gold futures contracts and the new idea of a physical exchange was initially mentioned earlier this month by economic affairs secretary, Shaktikanta Das,  suggesting there will be official backing for IBJA’s proposal.

To push ahead with the plan, the IBJA is seeking partners to launch the scheme. It is likely banks will be among the investors interested in a physical gold exchange, but this will need government approval. Currently, banks are not allowed to trade on commodity exchanges in India that offer futures contracts.