India already has a sizable gold spot market.

By providing a forward curve for pricing,

a futures exchange will simply supplement the present system. The futures platform
will completely connect with the spot market in the future, forming a symbiotic
relationship in which mutual advantages will flow fluidly.

The futures market will allow investment gold to flow freely into the market, bolstering the
price discovery process even further.

Need for futures trading in gold

The most liquid asset on the planet is gold. The standard gold bar, with a purity of 995 or 999,
is accepted all over the globe and restores its full asset value, making it the safest option. More
significantly, being the world's largest consumer, India has always been intertwined with the
global bullion market. Futures, options, swaps, and other derivatives in gold are permitted in
all developed economies. Different segments of the market profit greatly from these derivative
products. The following are a few examples:

Gold producers are constantly vulnerable to the danger that their gold may lose value
by the time it is mined, processed, and sold. Futures trading allows them to sell their
gold in advance at prices that are good for them, ensuring that their margins are
protected.
Jewellery designers purchase gold in order to create pieces that meet the needs of their
clients. For them, a time lag between the purchase of gold as a raw material and the
selling of completed jewellery exposes them to price risk, reducing profit margins. They
will be able to book gold according to their design timetable through futures trading.
Furthermore, they may always hedge their risk on futures in the event of uncertainty,
so that any losses in their firm are compensated by comparable profits on gold futures.
One of the most fundamental motivations for futures trading is supply worries. Scrap
recovery, central bank sales, and loans from official gold stockpiles have all contributed

to supply growth in recent years. The price of gold swings as a result of these supply
surges, generating volatility.

Because gold is valued in US Dollars, every economic activity that has an impact on this
currency has an indirect impact on the gold price. In addition, factors such as inflation,
deflation, bankruptcy, and so on have a significant impact on the economy. Because gold is an
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