Gold prices are off all-time highs, but the precious metal continues to be one of the best-performing assets. Commodity exchanges have been busy offering new products on their platforms amid the lockdown to attract customers. The rise in popularity on paper gold investments has led to newer products and participants alike.
BSE’s India International Exchange on August 31 launched future contracts Gold Quanto and Silver Quanto with underlying as gold spot of 995 purity and Silver spot of 999 purity. Both futures will be settled in US dollar cash. This platform is for market participants who are looking for exposure to foreign commodities minus forex risks.
From September 1, NSE will accept gold bars produced by India Gold refiners for delivery on the exchange platform. Refiners will follow a robust mechanism to adhere to processes laid by NSE on the procedure, quality and delivery. Prior to this, the exchange only accepted LBMA gold and silver bars.
MCX introduced the Bullion commodity index – 'Bulldex' on August 24, 2020. The index offers investing opportunity to retail and institutional players, and mutual funds in the bullion sector. The Index has a 70:30 weightage on gold and silver in a single product. It's a cash-settled product with current contracts available for September, October and November.
Portfolio managers suggest a 10-15 percent of portfolio in gold, as the metal continues to hold firm post making all-time highs on the back of geopolitical tensions, massive monetary easing and uneven economic growth.
Meanwhile, physical gold and jewellery demand in India continues to remain weak. As scrap sales increase, bullion traders are working with discounts of up to $45-50 an oz, which is the highest in five months.
As the traditional way of buying gold is taking a hit, paper gold and gold trade is thriving.
Gold ETF holdings are at an all-time high, and Sovereign Gold Bonds have seen record participation at Rs 8,000 crore between April and August 2020. The Last tranche of SGP is open for subscription until September 4. The price of gold by the government of India has been fixed at Rs 5,067 per gram, if you opt for it online. There is no GST and no capital taxes on maturity and you stand to earn 2.5 percent per annum on your investment.
As gold goes mainstream with nearly 32 percent gains this year and probabilities of higher highs, industry heads believe that more products will be launched in the sector soon.