India's largest commodity bourse--the Multi Commodity Exchange of India --may soon unveil futures contract in gold coins in an attempt to tap the small retail investors across India.
MCX officials said that the exchange will soon apply for gold coin futures contract before the apex commodities regulator, the Forward Markets Commission.
While the contract specifications are still being worked out, the product is expected to be a monthly contract of 8 gm to 10 gm coins, which will provide delivery of pure 24 carat LBMA-approved gold coins.
Initially, the delivery centre will be Ahmedabad but at a later stage the exchange is looking to have a distribution network with different retail outlets to deliver the coins at some other centres.
With banks charging a premium that range between 7-12 per cent, the retail investors will be spared the premium on the exchanges. The margins that investors have to pay to keep the contract alive will also be much less. They can also be assured of the quality, which can be a question in buying these coins from the local jeweller.
MCX chief business officer Sumesh Parasrampuria said that presently there are no contract in gold coins at any of the domestic exchanges and also globally.
"Gold coin futures will help in price discovery which will bring down the high premium that are otherwise paid by the buyer," Mr Parasrampuria said. He added that this contract will benefit the retail investor who uses the gold coins for gifting purpose and also as an investments, a concept which has gained popularity in the last few years in the country.
Gold coin sales during the festive season that is between Dussehra (October 21) and Diwali (November 9) had shown an increase of 20 per cent at approximately 2.5 tonnes against similar period last year by the organised players in the market according to World Gold Council. But it is also to be seen that these organise players make only 10 per cent of the total market.
Gold is valued in India as a savings and investment vehicle and is the second preferred investment after bank deposits.
India is the world's largest consumer of gold in jewellery as investment. In July 1997 the RBI authorized the commercial banks to import gold for sale or loan to jewellers and exporters. At present, 13 banks are active in the import of gold.
This reduced the disparity between international and domestic prices of gold from 57 percent during 1986 to 1991 to 8.5 per cent in 2001.