The Hindu Business Line : MCX ‘gold guinea’ volume touches Rs 10 cr

The newly launched futures trading in gold guinea (8 gm gold coin), on Multi Commodity Exchange of India Ltd (MCX), seems to be a hit with average daily volume touching Rs 10 crore in the first month itself.

A month ago, MCX launched ‘gold guinea’ where the minimum contract size was 8 gm of gold and in its multiples to encourage retail participation in gold trading.

The actual quantity of retail gold that results in delivery will be known only when the first contract expires in July. MCX, where gold has been the single largest commodity traded since its inception, uses the price difference between the gold sold through it and some of the banks and the assurance on purity of the gold sold by it as its USP (Unique Selling Proposition).

A senior official of MCX told Business Line that the exchange had daily average trading volume of Rs 10,000 - 12,000 crore of all commodities. Of this, bullion contributed around Rs 4,000 - 5,000 crore. The rest came from trading in energy, base metal components, agricultural commodities, etc.

He said earlier, trading in bullion consisted of three types of contracts – 100 gm, 1 kg and 3 kg which were essentially aimed at bullion merchants.

Explaining the advantage, he said, at the time of placing an order the buyer was required to pay only five per cent of the contract value and either pay the balance amount and take delivery of gold or close the contract before it expired. MCX supplied London Bullion Market Association (LBMA) approved gold coins in tamperproof packs. He said the coins would be 995/999 purity and the rates quoted most of the days were finer than bank rates. The exchange members may provide the local bank rates to the buyers for comparison.

The official said the launch of ‘gold guinea’ has led to a lot of retail participation in gold trading because of better pricing, assurance of purity and the time the buyer gets to make full payment for delivery. He clarified that the product was not offered with an intention to generate trading volume but to encourage retail participation. Since the launch of the product, the open interest was 108 kg (13,500 lots). The exchange was trying to make gold an easily tradable commodity.

He said the exchange would take three or four days after the expiry of the contract to deliver the gold coins. The buyer has the option of taking delivery of gold through the MCX member with whom he has an account or directly from select delivery centres of G4 Securitas in the country. In case of any dispute on the gold delivered, the investors could approach the Forward Markets Commission (FMC) or the investor’s grievance cell of MCX.

More Stories on : Gold & Silver | Commodity Exchanges

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