India International Bullion Exchange (IIBX), India’s first bullion market exchange launched in July 2022, just introduced gold futures trading on its market. IIBX, located in GIFT City Gandhinagar, began trial runs for futures trading with daily mock sessions beginning a few weeks ago on October 3.
The trading platform will use dollar-priced trading so Indian investors can purchase assets to hedge against inflation and other financial risks. The mock trading period will last for 45 days with the goal of collecting feedback and increasing participation.
“The exchange is in the process of implementing a new trading platform for futures trading in bullion. The IIBX will conduct mock trading sessions daily from October 3, except on Saturdays and Sundays,” the exchange’s report states.
Ashok Gautam, the managing director and CEO of IIBX, believes the mock trading sessions will help investors feel more comfortable with the platform. Investors can learn how the different features work during this period to increase interest upon the full launch.
“The mock trading sessions are designed to help members familiarize themselves with the features of the new trading platform, trading terminal, clearing and settlement processes, and risk management features in the new gold futures trading platform,” Gautam explained.
Offering traders in India a way to invest in gold futures in dollar denominations without duties and tax is a major step forward. Investors can take advantage of the safe-haven asset in a more inflation-proof way. The Multi Commodity Exchange of India Limited (MCX) may offer trading in rupee denominations, but it comes with taxes and duties, as well as higher inflation concerns.
“The benefit of trading gold futures on IIBX is the dollar denomination trading as it will be a lucrative opportunity for entities which used to trade outside India in Singapore and Dubai,” an inside source explained.
“Gold futures trading on IIBX will be in dollar denominations. Resident entities in India, other than individuals, are permitted to hedge their gold price risk through gold futures on the IIBX platform. This gives them better risk management capabilities while conducting gold price risk hedging. This aligns with the long-term vision of Gift City and IIBX to onshore offshore businesses,” Gautam continued.
So why gold futures?
Gold futures come with minimal counterparty risk, lower starting capital requirements, and high potential returns. By choosing gold futures, traders can eliminate the risks that come with managing physical gold while cutting out numerous fees, like storage, insurance, and management costs. Gold futures provide a taste of precious metals investing without a lot of the complexities.
Because of these benefits, gold futures typically perform above spot gold price. As of writing this, gold futures breached the key $2,000-per-ounce line, hitting trading highs on Monday at $2,010.60 per ounce. In the past five days, gold futures have increased by 1.03% or 8.71% in the last month.
India is a hot spot for gold demand right now. The nation is the second-largest gold buyer in the world. India’s gold demand continues spiking each year as its retail consumers purchase gold at extraordinary rates for cultural and investment purposes alike.
Technavio, a research and advisory company, estimates that India’s jewelry market will expand by $21.54 billion between the years 2022 and 2027, showing a 5.54% compound annual growth rate. The company believes this growth will come from the cultural significance that gold jewelry carries, combined with increasing income levels and technological advancements.
“The market growth in the gold segment will be significant during the forecast period. The rising income levels of consumers have increased the demand for gold jewelry in India. Despite the development of alternative materials and designs, gold jewelry is still worn on special occasions and is a preferred investment option in India. As a result of these factors, the segment will witness maximum growth over the forecast period,” the report explained.
When considering India’s rising gold market and the recent performance rates from gold futures, it only makes sense that IIBX now wants to offer gold futures trading.
“Gold is an important component of Indian Jewelry,” Technavio explained.
As the market continues expanding, India’s first bullion market exchange wants to capitalize on this opportunity by offering traders a way to invest in dollar-denominated gold futures.
Traders interested in joining the IIBX mock sessions can connect to IIBX by using secure SSL VPNs. Individuals can gain their account username and password by emailing their information to IIBX. As always, investors should consult their financial advisors before making any portfolio decisions.