NCDEX plans gold contract on price hedge as delivery is tough

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NCDEX has moved a proposal with sectoral regulator FMC for launching a new gold contract (Reuters) NCDEX has moved a proposal with sectoral regulator FMC for launching a new gold contract (Reuters)
SummaryNCDEX has moved a proposal with sectoral regulator FMC for launching a new gold contract

Commodity bourse NCDEX has moved a proposal with sectoral regulator FMC for launching a new gold contract focusing on price hedging as it feels delivery is not practical due to curbs on imports of the metal.

NCDEX, which has pioneered a number of agri-contracts, now aims to expand to bullion and metals.

"We want to 20-30 per cent of trade to come from non-agricultural items in the next 2-3 years. We are working on new products. We have submitted a proposal to FMC for launch of a new gold contract focusing on price hedging and not delivery," NCDEX Managing Director In-charge Samir Shah told reporters here.

When asked why the bourse is not planning a delivery option to traders under the new gold contract, Shah said, "Delivery of gold after the settlement of the trade on the exchange is not practical in the current environment due to import restrictions on gold."

"In such a situation, if you focus on delivery-based gold contracts, you might have the delivery of indirectly channeled gold on the exchange platform and create price disparity. There is a genuine problem," he said.

The NCDEX chief added that gold delivery has come down even on MCX, which has the maximum participation in bullion and metal trade.

"Gold delivery has come down on MCX. We never had liquidity in our gold contracts. Even if we had, we too would have seen delivery not happening," he said.

To contain current account deficit, the government has taken several measures to curb imports. Traders are mandated to export 20 per cent of the imported gold with some value addition. Import duty has been raised to 10 per cent, while shipment of gold bars and coins have been banned.

India, the world's largest consumer of gold, imported 393.68 tonnes of the yellow metal during the April-September period of this year, as per official data.

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