Govt wants India gold exchange

As refining picks up, govt seeks to promote exports

India might see its first gold exchange soon. The trading platform would be made available for all types of bullion dealers, jewellers, bullion refineries, individuals, and even temple trusts. This could be seen as a significant move to discover standard gold prices in the country.

The proposal to set up the gold exchange was made by Shaktikanta Das, secretary, department of economic affairs in the finance ministry, on Friday when he interacted with jewellers and stakeholders in the bullion sector during a meeting of jewellers and bullion sector stakeholders. He has asked industry to come out with a concrete proposal for this. In major gold markets like Turkey and China, such gold exchanges have played a major role in developing the bullion sector.

Speaking at the Third India International Bullion Summit here on Tuesday, Das said, “Can we think of a gold exchange where there can be transparent trading? Those who have surplus gold can sell it to those in its requirement. There is a jeweller who needs gold temporarily. So instead of its import, he can purchase it locally.”

While the government has not spelt out its mind on this, experts believe it will most likely be an electronic platform for giving and taking physical delivery, like a spot exchange where agri-commodities are traded but under strict regulations.

SHINING

• There are two major spot exchanges for gold trading globally
• Istanbul Gold Exchange of Turkey was set up in 1993 by its central bank which also oversees private import of gold. Turkey has set an example for successful gold monetisation
• Shanghai Gold Exchange was set up 13 years ago. It is also a clearing exchange for OTC gold trades and regulates gold business
• In India there are some online spot trading platforms for gold, but they are not regulated
• Gold futures are very vibrant in India, with MCX as a market leader and gold hedging and deliveries taking place there. However, FICCI and WHC had recommended gold exchange for spot trading  two years ago

The proposal for such an exchange was made by Ficci and World Gold Council in December 2013. The report prepared by them said, “The buying or selling of gold in India takes place through many channels, formal and informal. Prices vary across both channels and regions and arbitrage is high. A dedicated institution like a gold exchange focused on gold trading will create a national pricing structure for gold and create required infrastructure including storage.”

Shanghai Gold Exchange was set up in 2002. It is the world’s largest and the gold market in China is regulated by it. Istanbul Gold Exchange in Turkey has helped improve gold infrastructure significantly there. Turkey has set an  example for successful gold monetisation. Somasundaram P R, India managing director, WGC, said, “Discussion in India on how gold can help the economy is healthy and idea of gold exchange should be examined by the sector as it will improve price transparency and improve gold-related infrastructure in India and bring over-the-counter trades on the exchange’s platform.” Mohit Kamboj, president of India Bullion and Jewellers’ Association had preferred setting up a gold bank dedicated to the needs of the bullion sector. But, the government has not favoured this idea. “Gold exchange can be set up by government-owned banks or institutions or the RBI may allow private sector shareholders, subject to regulations which will be prepared. As gold refining is increasing in the country, with 30 per cent of imported gold being refined in India, the government wants to promote export of gold and a gold exchange would be a platform for buying gold which can be exported and it can also declare gold refined in India as good delivery,” said an observer.