Coming Soon, India's First Physical Gold Exchange

CHENNAI: The country’s first physical gold exchange could be a reality next year.

Mumbai-based India Bullion and Jewellers Association (IBJA), a trade body comprising gold dealers, traders and jewellers, is in dialogue with the Ministry of Finance to set up with the proposed exchange.

“We are in touch with the Finance Ministry, which will soon come out with a policy document on the proposed trading exchange. Once the document is ready, we will have clarity on the structure and ownership besides other formalities we need to deal with,” Saurabh Gadgil, Vice President, IBJA told Express.

He added that the association will also coordinate with regulators like Sebi and RBI besides seeking support from the current exchanges on the running of operations. Setting up a gold trading exchange allows jewellers, refiners, banks and consumers to trade physical gold. Those who have surplus will have a transparent platform to sell directly.

India consumes nearly 1,000 tonne of gold every year. Indian households are believed to have stocked up over 22,000 tonne of gold, which the government has been trying to mobilise via the recently-launched schemes like Gold Monetisation. Setting up an exchange, which allows transparent trading, will be another step to encourage households to open up their gold vaults.

The idea was first sounded off by Shaktikanta Das, Secretary, Economic Affairs last week. Analysts say, such a move could overhaul physical trade in the world’s largest bullion market. Currently, China, one of the top gold consumers, runs such a bourse, where all domestic production and imported gold has to be bought and sold.

In India, the Multi Commodity Exchange (MCX) and National Commodity and Derivatives Exchange (NCDEX) offer gold futures contracts in India, but there is no platform for physical trade as such.

The move to set up the exchange also comes a month after the government had launched three schemes namely, Gold Monetisation and Sovereign Bond and Gold coins.

According to Gadgil, there were several options currently to forge tie-ups, with existing exchanges, or banks etc.

“We will have to wait for the government’s policy document before firming up our plans. We want to launch the exchange, but the structure and other modalities will be finalized only next year,” he added.

India Bullion and Jewellers Association may need partners to launch the exchange as an anchor investor, or promoter, cannot hold more than 26 per cent in a commodity exchange.