BSE readies to launch Electronic Gold Receipts to enable spot gold trade

Bombay Stock Exchange (BSE) is seeking regulatory approval to launch Electronic Gold Receipts (EGR) on it’s platform.

Key points to note –

  • EGR is consequent to announcement regarding spot gold exchange in this year’s budget.
  • EGR would enable spot investing/ trading in gold that is allowed in many other countries. In India, presently one can invest/ trade in gold only through derivatives or Exchange Traded Funds (ETF).
  • Spot trading is expected to bring in more discipline in the gold markets.
  • Government is expecting that this should also ensure a uniform gold rate across India. Currently, the prices vary across the states.
  • EGRs would be represented by actual physical gold in the custody of the authorised vaults.
  • An interface will be developed between the vault managers (of physical gold), depositories (that hold EGRs in demat) and stock exchanges and clearing corporations that clear the trade.
  • One can keep holding EGR for perpetuity or redeem those in lieu of the physical gold.

The concept and the process are surely in the right direction. It should help remove some inherent inefficiencies and more than anything should be cheered by the real long term investors into gold.

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