Let us know what the new framework says and how gold will be traded in it.
The Securities and Exchange Board of India (SEBI) has prepared a proposal for gold exchange. Let us know what the new framework says and how gold will be traded in it.
India’s annual gold demand is 800-900 tonnes. It is a big importer, but there is no big liquid spot market to base the price on. The Securities and Exchange Board of India (SEBI) has prepared a proposal for gold exchange. Let us know what the new framework says and how gold will be traded in it.
the new order
Investors can trade in Electronic Gold Receipts (EGRs), which will be issued in exchange for physical gold in the existing stock exchanges. Along with this, they will also be issued in the proposed gold exchange, as per the SEBI framework.
How will gold trading be done in the new system?
Investors can trade in Electronic Gold Receipts (EGRs) on existing stock exchanges and proposed gold exchanges. EGRs will be issued in lieu of physical gold. Investors can submit physical gold in vaults and they will be issued EGR in return. The vaults and storage will be maintained by SEBI registered vault managers. Vault Managers and SEBI Registered Depositories allow issuance of EGR against physical gold. The EGR will be of 1 kg, 100 g and 50 g. The validity of EGRs will remain forever.
How does gold exchange work?
Gold Exchange will be the national platform for buying and selling of EGRs. It will also create a framework for fixing the national price for gold. The gold exchange will offer value-chain participants as well as a host of benefits to the entire gold market ecosystem, such as effective and transparent price tracking, investment liquidity and gold quality assurance. But along with the existing, new stock markets have also been allowed to trade in EGR.
What are its advantages and disadvantages?
Indian investors have many options to invest in gold. These include physical gold markets, gold ETFs, gold fund of funds, sovereign gold funds and digital gold. All have their advantages and disadvantages. Gold Exchange and Gold EGR are better in terms of liquidity, security and tax. It is better to invest in gold in the short to medium term.
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