What is a Goldhedge contract?

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What is a Goldhedge contract?
To make trading in gold via Gold futures contract more transparent, National Commodity Derivatives Exchange (NCDEX) introduced Goldhedge contract in mid-January. The contract is directly linked to international gold prices and excludes other charges including premiums, customs duty, VAT, local sales tax, octroi etc. To know in what respect newly introduced Goldhedge contract is different from regular Gold Futures contract traded in the market refer to the table below:

Points of difference between Goldhedge contract and Gold futures contract traded in the market:

Point of difference NCDEX Goldhedge contract Gold futures contract
Purpose Offers transparent and cost-effective hedging tool Standardized contract that provides hedge against inflation and also proves suitable for speculators
Terms of Settlement
Intention-matching contract. Settlement or delivery to effect only when buyer as well as seller agree in respect of quantity and location in advance else contract is settled in cash
Delivery-based settlement occurs on the date and time decided in advance for the transaction
All customer segments including retail investors, physical traders and jewellers shall trade in gold through Goldhedge contract
Contract expiry
Expiry of Goldhedge contract is aligned with the expiry of currency futures contract

Contract size
Contract for 1kg and 100 gm GoldH100 is  available currently
Maximum order size is 10 kgs

Contract value
Lower in comparison to contracts traded on other exchanges as several charges and customs duty is excluded
Involves higher cost or contract value is more in comparison

Story first published: Tuesday, February 11, 2014, 10:51 [IST]
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