What is gold exchange and how will it work?

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Indian’s love for gold is not unknown, especially when one considers the fact that India is the second-largest consumer of gold in the world after China. India imports about 800-900 tonnes of gold every year. Gold has been considered pure, auspicious, of religious significance and as a safe haven asset for generations in India.

As a commodity, derivative contracts in gold are available for trading on exchanges but there is no spot market for the precious yellow metal but now with the latest announcement by SEBI, the capital market regulator, has approved a framework for a spot gold exchange.

Investors will be able to trade in instruments called ‘Electronic Gold Receipt’ that will have all the characteristics of shares or securities in terms of trading, clearing and settlement.

Experts are of the opinion that SEBI’s approval paves way for transparent price discovery, investment liquidity and ensuring the quality of gold. Some analysts believe that this would enable the implementation of uniform gold rates across India.

In fact, increased investment in gold can also be expected as consumers receive assurance of quality.