For those not looking to put money on physical gold, purchasing market-linked investments is a good way to invest in the precious metal.
Gold bullion (the physical form of gold as coins or bars) is an asset that even a common person understands. Futures or options are just advanced market investment instruments that more experienced investors who do not want to risk a lot of capital can bet their money on.
MCX or the Multi Commodity Exchange of India launched India's first bullion index in August, called MCX iCOMDEX Bullion or Bulldex. To encourage active participation in its newly launched product, the exchange said that no transaction charges would be levied on Bulldex futures contracts up to 23 November.
The bullion index, Bulldex, being launched by MCX is the sixth product in bullion complex with 1-kg gold, 100-gm goldmini, 8-gm gold guinea and 1-gm gold peta, while the Options on Futures on 1-kg gold is already in place. launched options on goods in 100-gm goldmini contract.
Having gold and silver as underlying, the Bulldex will have a market lot size of 50 and, unlike gold and silver contracts, it will be a cash-settled futures contract, thus making it attractive for hedgers and institutional participants, who are hesitant in taking delivery of gold and silver, an MCX statement said.
What is the purpose of an index?
An index serves as a benchmark to compare performances of two or more market instruments. A commodity index, for example, will track the price and return on investment (RoI) of a basket of commodities.
Bulldex has gold and silver as the underlying asset. The value of the index will fluctuate based on the movement in prices of their underlying assets and the weightage of those assets. This value can be traded on the exchange.
It also helps investors check the performance of other traded instruments in the market against the index.
Details on Bulldex:
Future contracts expiring in the months of September 2020, October 2020 and November 2020 were made available for trading with effect from 24 August.
Contracts of further expiries will be launched every month as per MCX's disclosed calendar till April 2021.
Underlying Index: MCX iCOMDEX BULLION
Contract Start Day: 20th day of contract launch month. If 20th day is a holiday then the following working day.
Last Trading Day: One business day prior to the start of the rollover period in the underlying constituent/(s) index. In case, if there is no rollover during any calendar month, the contract will expire on 25th day of the month. If 25th day is a holiday, then preceding working day.
Trading Period: Mondays through Fridays
Trading Session: Monday to Friday from 9 am to 11:30/11:55 pm
Trading Unit (1 Lot): Rs 50 * MCX iCOMDEX Bullion Index
Quotation / Base Value: Index Points
Maximum Order Size: 80 Lots
Also, the rally since mid-March in gold and silver to record highs is also expected to be beneficial for MCX, which had recently witnessed its daily trade volume rising multi-fold due to higher prices and increased volatility in gold and silver.
MCX had tested bullion index futures trade in mock trading exercises in July.
The exchange also has indices on base metals and energy, which will be launched in a phased manner after regulatory approvals, the statement said.