Indian Gold Traders Step Up Hedging on Bourses


"Traders are using our platform actively to buy gold. We see this trend increasing."

Indian gold traders are increasingly turning to hedges on local bourses to fight price volatility as they seek to revive consumption, exchange officials and analysts said.

Physical delivery of gold in settlement of contracts, a key indicator of genuine hedging, rose to 2.7 tons in February, compared with 0.348 tons a year ago, data from the Multi Commodity Exchange (MCX), India's largest commodity exchange for bullion, showed.

"Large volatility is there and we need to be protected by it, this also shows the maturity of exchanges as delivery base center," said Daman Prakash Rathod, director of the Chennai-based MNC Bullion, one of the country's biggest gold traders.

Gold futures, which struck a record high in December last year, has been on a downtrend this year on a strong dollar overseas, which dims the yellow metal's appeal as an alternative investments.

Indian gold futures have fallen by about 8% since the start of the year, after hitting a record high of Rs 18,294 in December.

"The recent decline in prices made most of the traders accumulate at lower levels and take delivery, and also members have been aggressively promoting small-sized gold products," said Harish Galipelli, vice-president research with JRG Wealth Management, a commodity broker in Kochi. The price fall has led to expectation of a revival in gold sales after imports slumped last year on record high prices.

"Traders are using our platform actively to buy gold. We see this trend increasing," said Anjani Sinha, director, MCX.

Lower price and standardization will attract actual wholesalers and refiners to source their raw material needs through electronic platforms.

The formation of an active spot market for the commodity has also helped boost hedging interest, traders said.

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