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Below is the Views On Gold By Chirag Mehta, Sr. Fund Manager, Alternative Investments, Quantum Mutual Fund
Although not surprising, the budget disappointed by not reducing the customs duty on gold which has led to price distortions and hamper efficient functioning of the gold markets in India. It also fell short of providing assurance on any road map towards reducing this anomaly that exists.
The finance minister in the budget has proposed that GIFT City would set up an International Bullion exchange(s) in GIFT-IFSC as an additional option for trade by global market participants. Last budget had proposed a spot gold exchange which was the need of the hour as many of the key market players are currently under served by the current market structure and thereby stand at a disadvantage. Many of the important gold players demand a market infrastructure that helps bring transparency and standardization that a spot exchange could offer. However, the participants continue to await a spot exchange as yet.
We hope that the idea of international bullion exchange is just an extension of the spot gold exchange proposed late year but more broader in vision. The now proposed bullion exchange in GIFT-IFSC should not just limit to global players or participants having presence in the GIFT city. It should as appropriately allow participation from all players in the Indian gold ecosystem into relevant instruments that help bring transparency and efficient price discovery. The finance minister mentioned about the eco system that existed in form of vaults, banks, insurance etc. The success of the international bullion exchange would depend on as much as open and free participation of key players in the gold value chain as possible and relevant products that address their requirements. It should be well regulated and have clear and well defined rules of operation, facilitate imports and transfer to local markets, assurance on quality, lending and borrowing mechanisms and tax efficiency to be successful in fulfilling its intended role.
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