IIM-A study calls for gold spot exchange

The India Gold Policy Centre (IGPC) at the IIM-A here today called for setting up of a gold spot exchange for efficient price discovery and ensure quality.
The recommendations were submitted to the centre following a detailed study by the Indian Institute of Management, Ahmedabad (IIM-A).
The IGPC claimed that such a spot exchange will not only be viable but also increase value added activity.
"Despite being the second largest gold importer in the world with a demand of nearly 1,000 tonne annually, India lacks many key elements of the gold ecosystem," IIM-A professor Joshy Jacob, who conducted the study along with Prof Jayant Verma, said.

A gold exchange would lead to efficient price discovery, assurance in the quality of gold, active retail participation, greater integration with financial markets, and greater gold recycling, Jacob said.
"At present, most of the demand for physical gold in the country is routed through hubs outside the country, particularly Dubai. Quality of gold available and the price in various parts of the country vary significantly. Large players procure gold directly from miners and traders in overseas gold hubs, while the medium and small jewellers are often forced to depend on large players and face significant price disadvantage," he said.

The study was conducted after interacting with many stakeholders and after studying the gold spot exchanges in Turkey, China Singapore and Dubai.

"We have seen that after Turkey, China and Dubai set up gold exchanges, gold trade became more regularised and a gold value chain has been completed in those countries, Jacob said.
"To avoid conflicts of interest the gold exchange must be promoted by neutral players like stock exchanges, banks and other financial entities rather than by gold market participants," Verma said.