With GIFT City’s Bullion Exchange (IIBX) becoming the platform of choice for gold consignments, costs could initially be reduced by $50 per kilo in a country where the yellow metal has beaten all competing assets, people familiar with the matter told ET. Classes serve as traditional stores of value.
For every 100 tons worth of gold imported through the exchange, jewelers can save up to $5 million in foreign exchange by using the exchange platform instead of buying the metal from a bank.
Of course, with exchanges becoming the main channel, banks could lose the primacy of the business, traders said.
If a jeweler places an order with a bank, the order cannot be reversed without any penalty. However, on exchange platforms, there is no such coercion unless their bids match those of the sellers. This leads to better price discovery.
“The Bullion Exchange is the first such transparent platform where jewelers can directly bid on imported physical gold, allowing better price discovery,” said Ashok Gautam, CEO of International Bullion Exchanges IFSC. Participation will explode.”
Initially, 64 jewellers attended the Prime Minister’s launch of the bullion exchange dedicated to the nation last week. More than a dozen other applications are currently being processed, and the exchange has received two dozen inquiries from jewelers in the past few days, market sources said.
IIBX has three vaults in Gift City that hold 446 tons of gold and 2,580 tons of silver.
It is sourcing physical gold from the world’s top bullion banks. JPMorgan, Citi, Standard Chartered and Industrial and Commercial Bank of China are among the institutions that may provide physical gold or are in talks to provide physical gold.
Individual banks could not be contacted immediately.
“We will import gold through the IIBX to meet our requirements,” said Ahammed MP, chairman of Malabar Gold & Diamonds. “The price of gold is currently distorted as designated gold importers charge different margins. The exchange will bring order. and transparent gold pricing mechanism.”
Importing gold directly through a spot exchange is beneficial for large jewelers like Malabar Gold.
India imported 837 tonnes of gold in FY22. Taking into account the expected cost savings of exchange transactions ($50/kg), this represents a saving of $41 million. However, this assumes that all gold is imported into the country via IIBX. In addition to gold bars, Doris was also imported.
Initially, IIBX was expected to take a 40% share of the country’s metal imports.
“Spot exchanges have opened up another avenue to import gold through trade,” said Bhargav Vaidya, a leading gold trade analyst. “The increase in gold imports must increase demand.”
Importing gold through an exchange also ensures purity and standardization, as the exchange will serve as a benchmark setting platform for the quality of imported bullion.