Harnessing the power of gold as an asset class

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Slug: Understanding the Benefits of Investing in a Transforming Raw Materials Ecosystem

Time and time again, investing in commodities, especially gold, has proven its relevance as a safe haven, equity hedge and portfolio diversification. During times of uncertainty, such as the ongoing pandemic, it has also generated exceptional returns; even when countries were stranded, gold reached all-time highs in nearly 70 currencies.

On the Indian stock exchanges, there have been huge gold and silver rallies in the recent past. Volumes, revenue and open interest hit several highs in 2020, while option volumes also reached maturity. At the same time, SEBI has facilitated the ecosystem with more gradual regulation.

To explore the short and long term potential of investing in gold, various gold products that have emerged in recent times, the benefits for a retail investor’s portfolio and how it could build wealth, among others Related topics, MCX IPF and CNBC TV18 hosted ‘Commodity Classroom’, a virtual discussion series featuring industry experts sharing their perspectives.

Transition time

Moderated by Manisha Gupta of CNBC TV18, the first panel consisted of Shivanshu Mehta, Head – Bullion, Multi Commodity Exchange of India; Prithviraj Kothari, Managing Director, Riddisiddhi Bullions; Saurabh Gadgil, Chairman and CEO, PNG Jewelers and Deepak Gupta, Director, Kundan Group.

They discussed how the focus on precious metals as an asset class has been renewed over the past two years, due to the pandemic. Globally, exchange traded products and electronic accumulation have grown, and nationally, MCX has used this time to further innovate its product portfolio. He launched metal indices – Bulldex and Metldex, and introduced the delivery of refined Indian gold.

Interestingly, MCX’s 1g gold deliverable contract, the first of its kind in the world, has seen around 50,000 coins delivered since its introduction in 2019, while the 1kg silver deliverable contract, launched at the time. of Covid, has seen 70 tonnes of this retail product change. hands.

With the rapid price movements in the gold market and the simultaneous sharp devaluation of the rupee, commodity exchanges have provided hedging and liquidity. Even the community of jewelers, facing challenges due to the closure of their stores, was able to offer their customers lucrative programs, covering the risks involved by hedging their positions on the stock exchanges.

The new interest in these products and markets reflects a shift in the way various customer segments accumulate products electronically or use the efficiency and liquidity of futures order books for the integration of spot futures contracts. in order to better discover prices and mitigate risks.

Invest in the new era

The second roundtable continued to revolve around gold, highlighting its advantages as a wealth creator and other facets that make it a valuable part of an investment portfolio. This time, MCX’s Shivanshu Mehta was joined by Vikram Dhawan, Head – Commodities & Fund Manager, Nippon India

Mutual fund; Nayan Mahendra Gogri, Vice President, Quant Group and Dileep Narayanan, Head – Bullion & Treasury, Malabar Group, best known for popularizing “One India one gold rate” in 2020.

The panel discussed the best ways to invest in gold, depending on whether it is short or long term, the investor’s investment philosophies and risk parameters and whether it is held as a hedge investment. or for tactical reasons or for absolute reasons. Return. They also explained how it can be exploited as portfolio diversification and the extent of gold that could be held in an ideal portfolio.

Over time, new, easier ways to trade, acquire, and hold gold have emerged, and advancements in technology have welcomed new investors, such as millennials. Experts discussed which forms of e-investing are suitable for retail investors and explained how protecting clients’ interests builds their confidence and encourages participation.

Changing landscape

The next episode of ‘Commodity Classroom’ takes a look at the changing landscape of the commodities market due to regulatory changes, the launch of new products by the exchanges and the expansion of the list of participants which includes AIFs. , mutual funds, portfolio management services and eligible foreign entities, beyond individuals and companies. Participants – Rishi Nathany, Head – Business Development & Marketing, MCX; KK Maheshwari, President, ANMI; Ashok Agarwal, President, Globe Capital Market; Ramesh Varakhedkar, Head – Commodities & Currencies, ICICI Securities and Narinder Wadhwa, President, CPAI, shared their views on how indices have acted as large scale catalysts to participate in the commodity derivatives market.

Experts in the field have offered advice to retail investors on a variety of issues, including which products are suitable under which circumstances, the importance of having commodities in a portfolio and how to start investing in commodities and monitor the progress of the commodity. these investments.

Bright future

Overall, the “Commodity Classroom” series offered some interesting insight into how commodities are emerging as an asset class. Exchanges, like MCX, have strived to give clients – both hedges and traders – an organized means of investing and an ever-expanding suite of suitable products. Along with regulatory changes, these efforts and the adoption of best practices will go a long way in building confidence and encouraging much wider participation. The rapidly developing ecosystem predicts a bright future for commodities as an asset class.

This is a partnership publication


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