Jewellers’ body proposes to launch spot exchange for gold

The Indian Bullion and Jewellers Association (IBJA) is reported to be taking the initiative of setting up an exchange for physical gold after the government's efforts to tap gold lying with temples, trusts and households through a gold monetisation scheme received a lukewarm response.

The India Bullion and Jewellers Association, an association of gold dealers, traders and jewelers, is actively considering the proposal for setting up the country's first spot gold exchange, say reports.

The idea of setting up such an exchange, which will bring transparency to the market for precious metals, was first mooted by Shantikantha Das, secretary, economic affairs, at an industry event recently.

The Mumbai-based IBJA is looking for partners to launch the exchange as an anchor investor, or promoter, with a maximum 26 per cent stake. Other investors may include banks, the main importers of gold.

Banks are currently not allowed to trade in gold, although they import the commodity. It is also not known if major jewelers and gold traders will be interested in participating.

A dedicated physical gold exchange would bring transparency to the market and certainty to pricing of standard gold in the country. It will also allow jewellers, retailers, refiners and banks (once permitted) to trade in gold over a regulated platform.

The idea is to start with two or three delivery centres for gold and silver, which will help government monitor gold trade.

The need for an exchange was felt after the failure of the government's gold monetisation scheme launched last month. The scheme, designed to mobilise the country's gold hoard and reduce imports of the precious metal which are exacerbating the trade deficit, failed to get any response.

"There is a need for an exchange that will cater to small jewellers' demand," said Kumar Jain, vice president of the Mumbai Jewellers Association.

"Sometimes we need to pay hefty premiums. That won't happen as demand-supply will become transparent on exchange platform."

At present, 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.

China, the top gold consumer, runs such a bourse, where all domestic production and imported gold has to be bought and sold.

The setting up of a trading platform for physical gold will help industry to source gold locally and reduce dependence on imports, while also providing a transparent platform for consumers to part with their gold ornaments.

However, the setting up of a gold exchange also requires various regulatory approvals. It is also not known whether the government will allow the industry body to run an exchange for physical gold trade.