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Budget 2020: International bullion exchange in GIFT City may lead to better price discovery

GIFT City would set up an international bullion exchange as an additional option for trade by global market participants, Finance Minister Nirmala Sitharaman said. The country’s only International Financial Services Centre (IFSC) is in GIFT City, near Ahmedabad in Gujarat.

Written by George Mathew | Mumbai | Updated: February 2, 2020 12:14:22 pm
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The government has proposed to set up an international bullion exchange at IFSC in GIFT City — a move that could lead to better price discovery of gold, create more jobs and enhance India’s position in the global bullion market.

GIFT City would set up an international bullion exchange as an additional option for trade by global market participants, Finance Minister Nirmala Sitharaman said. The country’s only International Financial Services Centre (IFSC) is in GIFT City, near Ahmedabad in Gujarat.

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Somasundaram PR, managing director, India, World Gold Council, said, “The establishment of regulated international bullion exchange in GIFT City in India is a positive step towards making gold a mainstream asset class. With its unique locational, infrastructural and regulatory advantages as an IFSC, GIFT city is well placed to build a fair, efficient and transparent bullion trading ecosystem. An organised bullion trading system will benefit the entire supply chain particularly, small players and exporters.”

“This will lead to better price discovery of gold, create more jobs and further enhance India’s position in the bullion market. This announcement is in line with Prime Minister Narendra Modi’s vision that GIFT City would become a price setter in some of the world’s largest traded instruments in the next 10 years,” said Tapan Ray, MD & group CEO, GIFT City.

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“Finance Minister has re-emphasised the importance of GIFT IFSC as an emerging Global financial services hub. The policy pronouncement regarding GIFT IFSC gives a tremendous boost to investor confidence both in India and abroad,” Ray said.

Abhishek Bansal, chairman and managing director, Abans Group of Companies, said: “Creation of the exchange by GIFT City will add liquidity and depth to the gold commodity market. There is tremendous value potential to be unlocked from the gold industry in India in terms of it being one of the largest consumers of the precious metal globally and in terms of the finesse of jewellery produced in India, thereby acting as a vast employment generator.”

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As the true value of this gets unlocked by the formation of the bullion exchange, India will gain its rightful place in the global gold markets, he said.

Meanwhile, high prices kept buyers away from the yellow metal leading to a 9.2 per cent decline in demand for gold in India to 690.4 tonnes in the calendar year 2019 as compared to 760.4 tonnes in 2018. The yellow metal had glittered during 2019 with prices rising as much as 25 per cent.

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The maximum fall happened during the December quarter of 2019 when demand for gold fell 18 per cent to 194.3 tonnes as compared to 236.5 tonnes in the same period of 2018, according to the World Gold Council’s latest Gold Demand Trends report. Standard gold had risen from Rs 3,071 to Rs 3,802 per gram during the 12-month period. However, the value of gold bought by consumers in calendar 2019 rose three per cent to Rs 217,770 crore from Rs 211,860 crore in 2018 as prices and volatility remained high.

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