NCDEX plans to introduce India gold futures contract

The contract will only accept gold that is refined by Indian companies

National Commodities and Derivative Exchange (NCDEX) is planning a contract in the gold futures segment that includes delivery of gold refined by Indian companies. The contract has already received regulatory approval.

Earlier, NCDEX, primarily an exchange for agro commodities, had tried to introduce new gold contracts to expand its share in the non-agro commodities segment. It had introduced a gold hedging contract that reflected international gold prices alone.

Initially, two contracts will be launched in the futures segment — for 100g and one kg. While due-diligence of refiners is underway, chartered accountancy firm MM Chitalia has been appointed for financial due-diligence. Feedback from customers in this regard has been received.

A recent report by the World Gold Council and the Federation of Indian Chambers of Commerce and Industry had said, “Accredited gold refineries play an essential role in well-functioning markets. Dubai has recently announced setting up of a gold refinery, largely to cater to Indian gold demand.” The report recommended “focus on raising the standard of India’s gold refineries”.

For the new gold contract, NCDEX will accredit domestic bullion refineries. For deliveries under the contract, the gold refined by them will be accepted, along with those from international refineries accredited by the London Bullion Market Association. The accredited refineries will increase the availability of gold deliverable on the exchange.

In 2013, the amount of domestic recycled gold was about 100 tonnes, according to the WCG-Ficci report. The overall recycled gold market in India is said to be three times that amount.