WGC releases ‘Blueprint for Gold Spot Exchange in India: Report of the Industry Steering Committee’

Chaired by the World Gold Council, the industry steering committee  has released a blueprint for Gold Spot Exchange in India. The report is both wide ranging and inclusive, covering the vision of the industry committee for the future, combined with pragmatic guidance around successful implementation of the Gold Spot Exchange in India.

A feasibility study was completed in 2017, swiftly followed by the creation of an industry steering committee. To encourage buy-in across the Indian gold market, the steering committee includes representatives from a wide range of trade associations, as well as domestic and international banks and other financial institutions.

Says Somasundaram PR, Managing Director, India, World Gold Council and Chairman of Industry Steering Committee on India Gold Spot Exchange, “Establishing a Gold Spot Exchange will set the stage for an efficient, transparent and trusted gold trading ecosystem in India. The blueprint has been created in partnership with 27 industry peers, that included all of the leading industry associations and financial institutions. I want to thank each one of them for coming together for this initiative with their valuable guidance and support.”.

India is the second largest consumer of gold globally with an annual gold demand of approximately 800-900 tonnes and holds an important position in the global markets. However, the domestic market is plagued by challenges such as lack of quality assurance, weak price transparency and high market fragmentation. A gold spot exchange can address these challenges and eliminate resulting market inefficiencies.

A gold spot exchange, encompassing the entire ecosystem of trading and physical delivery of gold, could transform the gold market in India, the reports says,.. A spot exchange would drive quality improvement by institutionalising good delivery standards and integrating the vaulting infrastructure. It would establish an organised and regulated gold market that ensures price convergence and transparency. In addition, the exchange would also contribute to the successful implementation of gold-related initiatives, such as gold monetisation, and consequently help minimize the impact of gold on the current account deficit.

However, the report cautions, “Establishing a new gold spot exchange would be challenging in any jurisdiction. In India, it requires particular determination and focus. Our gold market is extensive, but it has a reputation for fragmentation, opacity and poor-quality control. Working with stakeholders across the industry, the Indian gold spot exchange can change that reputation for good.”

The blueprint is intended to provide a step-by-step guide, detailing how best to ensure that the Indian gold spot exchange fulfils that potential, creating value for participants, driving economic growth and establishing India’s gold market as a premier player on the global stage. “The blueprint may evolve and change during the implementation process. The ambition will not,” the report concludes.

Adds Somasundaram PR, “The blueprint aims to lay out the pre-requisites for setting up the Gold Spot Exchange and ensuring its smooth integration into the broader financial architecture. It proposes membership structure, product specifications, an operating model, liquidity and incentives for adoption and success. Through developing an optimal trading infrastructure for gold, market participants across the value chain should realise several benefits in the short and long term.”

“India is currently well poised to enable a positive structural shift in gold trading. The exchange will help establish India’s position as a global gold trading hub. India cannot afford to shy away from taking a more assertive role in the gold market simply because supply comes largely through imports.  As always, in a large country, a nationwide solution brings with it some challenges, and perhaps even alternative approaches, but with this blueprint, we hope that the industry can move forward together to the next phase of setting up the Gold Spot Exchange, along with appropriate policy and regulatory support,” he concluded.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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