10-gram gold contracts offered in India; gold deliveries rising fast


From The Economic Times, New Delhi
Monday, January 1, 2007


MUMBAI -- The National Commodity and Derivatives Exchange Ltd (NCDEX) will launch 10 grams immediate delivery gold contracts, to be traded on its electronic spot exchanges, in order to increase its bullion clients.

"It will be an immediate delivery contract in form of 10 grams gold coins for our spot exchanges and we plan to positively launch it before the first quarter of next year," NCDEX Head Business Development Shrikant Subbarayan told media.

The NCDEX electronic spot exchanges are expected to be rolled out from the middle of January starting from Rajasthan and West Bengal. The spot exchange-traded 10 grams gold coin contracts would be available for a cheaper price with assured quality and have a buyback option.

"If you buy a 10-gram gold coin from a jeweller or a bank it is usually 10 to 15 percent high in price while purity is a big question. One also faces a problem in buyback," he said. Through these contracts NCDEX is targeting to increase its bullion trade clients to five lakh to one million from current level of 25,000 to 30,000, he said.

The exchange had earlier started its futures mini gold 100 grams contracts and registered a delivery of 89 kg of gold during the first month of expiry of these contracts in December.

"The brokerage firms were able to tap the potential of small net worth investors who want to have gold as a part of its investment portfolio," he said. In its total bullion trade, NCDEX has witnessed an upswing on the deliveries.

In October a total of 743 kg of gold was delivered at the exchange. November saw a delivery of 940 kg of gold while December saw a record delivery of 1,104 kg. There was an increased participation from both the investor class and trading community in bullion either to take delivery or to make good returns.

"In the December month itself there was a return of 12 percent annualised, which is not possible through fixed deposit or call money market for a month," Subbarayan said.

If you buy gold in December and sell it in January through NCDEX, for a month you get 12 percent risk free returns whereas in other markets one cannot get a return of more than 5 percent, he said.

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