Gold price: Bullion Exchange ready to help Indian forex

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India is poised to save billions of dollars in foreign currency over the years as the world’s largest buyer of gold channels large annual imports through a dedicated bullion exchange. taker.

Costs could drop by as much as $50 a kilogram initially, people familiar with the matter told ET, as GIFT City’s Bullion Exchange (IIBX) becomes the preferred hub for gold shipments to a country where the yellow metal beat all competing assets. classes as a traditional store of value.

For every 100 tons of gold imported through the exchange, jewelers could save up to $5 million in foreign currency by using the exchange platform instead of buying the metal from banks.

Of course, with the stock market becoming the main channel, banks could lose primacy in this sector, dealers said.

If a jeweler places the order with a bank, they cannot cancel it without any penalty. However, on an exchange, unless their offers match those of the seller, there is no such constraint. This leads to better price discovery.

“The bullion exchange is the first transparent platform of its kind where jewelers can directly bid to import physical gold, allowing for better price discovery,” said Ashok Gautam, CEO of International Bullion. IFSC exchanges. “We expect an increase in participation from international buyers and sellers.”

Initially, 64 jewelers were onboarded during the launch of the bullion exchange which the Prime Minister dedicated to the nation last week. More than a dozen other applications are currently being processed and the exchange has received more than two dozen applications from jewelry stores in recent days, market sources said.

IIBX has three vaults in GIFT City where 446 tons of gold and 2,580 tons of silver can be stored.

It sources physical gold from the world’s largest bullion banks. JP Morgan, Citi, Standard Chartered and ICBC are among the institutions that may have provided physical gold or are in talks to do so.

Individual banks could not be contacted immediately.

“We will import gold through IIBX to meet our needs,” said MP Ahammed, chairman of Malabar Gold & Diamonds. “Gold prices are currently distorted because agencies appointed to import gold charge different margins depending on the gold pricing mechanism.

Directly importing gold through the spot exchange will benefit large jewelers like Malabar Gold.

India had imported 837 tonnes of gold in FY22. This translates to savings of $41 million considering the expected trade cost savings ($50/kg). This, however, assumes that the entire amount of gold is imported into the country through IIBX. Apart from gold bars, people also import dorays.

Initially, IIBX is expected to grab a 40% share of metal imports into the country.

“Spot trading opens another way to import gold through trade,” said Bhargav Vaidya, a leading gold trading analyst. “Demand must rise for higher gold imports.”

Importing gold through the exchange also ensures purity and standardization since the exchange will operate as a benchmark platform for the quality of imported bullion.

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