Indian Gold Futures Market and Delivery Dynamics

Abstract

Indian gold derivatives market has a Century old history with the inception of the famous Bombay Bullion Association (BBA) in 1919 though subjected to ban subsequently similar to other commodities. Following their revival in the early 2000s, gold futures volumes have witnessed a healthy growth of about 115% on average during the first decade from 2003 to 2012 reaching an average daily turnover of more than Rs.12 thousand crore but fell steeply to about Rs. 4.6 thousand crore in 2014 with the levy of Commodity Transaction Tax (CTT) in July 2013 causing a sharp increase in impact cost of futures trading. Although gold futures volumes have recovered notably to around Rs. 5.7 thousand crore during 2019, they remained well below the pre-CTT era. Indian futures market is characterized by relatively high delivery ratio to volumes at about 0.35% on average during 2011 to 2019. The aggregate deliveries of gold on MCX accredited warehouses stood at 114 tonnes till December 2019 with a record delivery of about 5.16 tonnes of gold in the month of August 2019. In view of these significant deliveries in gold futures, an attempt is made to understand trading trends with particular reference to pattern of gold stocks as well as deliveries in futures market.