Opportunity for retail investors & HNIs 2022: How Spot Gold Exchange can be a new way to invest

India is the second largest consumer of Gold and has large demand year on year. In the past few years, India’s import average at 700-800 tons of Gold every year has been exceeded to 1050 tons in 2021.

The Securities and Exchange Board of India (SEBI) has approved for spot Gold exchange to discover prices and managed delivery of physical Gold across the country.

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Abhishek Chauhan, Head Commodity & Currency at Swastika Investmart Ltd decodes how Spot Gold Exchange can turn out to be a new way to invest:

China and several other major countries have Gold spot exchange. Now, India is ready to launch spot exchange in short period of time.

In 2021, India has more than doubled its previous year's import as price drop favored retail buyers and stayed demand emerged for wedding that were delayed due to arrival of pandemic. 

Gold spot exchange will allow convert the physical gold in electronic from i.e. electronic gold receipt.

As far as investment is considered even after many long years of investment, participation is still low. A major chunk of investors usually move towards equity while the percentage of customers trading or investing or hedging in commodity are very few. 

Gold spot exchange will give edge to those customers who are still not doing any sort of investing but holding at least some amount of gold. 

Every Indian household, the very least, has some amount of gold which they can utilize for investing by the new Spot Gold Exchange. 

While at the time of delivery, receipt will be converted to physical gold. SEBI may allow trading in quantity as low as 1gm, 2gm. 5gm and 10gm which may attract more participants from retail to HNIs.

The Clearing corporation will settle the trade executed between buyer and seller on exchange. Gold spot exchange will have a single price across the country with transportation cost adjusted as premium or discounted from traded price.

Physical market will coexist with spot exchange. Exchange has advantages such as single good delivery standard, reduced market fragmentation, improved liquidity and single reference price. 

The vault manager will accept gold deposit and issue EGR, holder of EGR can convert this with any other vault manager who will be registered with SEBI as per guideline.

The spot exchange brings transparency and safety to gold transaction.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)