Commodity Online
MUMBAI: Thousands of tonnes of gold in Indian households is being targeted by India’s National Spot Exchange, which started offering contracts for domestic gold bullion, ranging from 8 gm to 1kg.

The National Spot Exchange, controlled by Indian market company Financial Technologies, is planning to aim the 20,000 to 25,000 tonnes of gold held by India’s households. Financial Technologies has promoted India's largest commodity bourse, the Multi Commodity Exchange (MCX).

"There has been no single market available in India where this gold could be sold till now, so the exchange decided to tap this potential," Anjani Sinha, managing director and chief executive officer of the National Spot Exchange, told mediapersons.

India is world’s largest consumer of the yellow metal, importing nearly 800 tonnes a year, or 20 per cent of global demand.

But while there is a modern market for the import of bullion, once it enters the system in India, there is no transparent exchange for its resale and conversion back into bullion.

Indians have to sell their gold to jewellers, who for a commission of between 5 and 10 per cent take it to refiners to melt down and resell.

Sinha said the recently-launched Indian Bullion Market Association would operate along the lines of its counterpart in London. Sellers will take their gold to approved refineries which melt it down and turn it into gold bars of international standard ‘995’ purity. They then place the gold in an approved vault and issue a certificate to the consumer who can trade the gold on the National Spot Exchange through an approved broker.

Sinha said the total commission paid by the consumer would amount to about 50 basis points. The scheme is also aimed at lessening India’s dependence on imports of gold by creating a more active market in its domestic stock of the metal. The company anticipates that initial trade will be in the range of 5-10kg a day of gold, building up as the idea gains popularity.

The Multi Commodity Exchange of India Ltd and the National Commodity and Derivatives Exchange Ltd, India’s biggest commodity bourses, only trade gold futures.

Small-sized gold contracts may not help India become a price-setter in the global physical bullion market as the country’s commodity exchanges are dominated by traders, producers and consuming companies, compared with the 13 million individual investors who trade stocks.