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The bullion market refers to the market where gold and silver are traded, primarily as over-the-counter (OTC) markets. It involves the wholesale trading of physical gold and silver in the form of bars and coins. The London Bullion Market Association (LBMA) is a key organization that coordinates activities in the London bullion market and sets standards for gold and silver bars.
The bullion market trades precious metals like gold, silver, platinum, and palladium in bulk forms such as bars, ingots, or coins. In India, it operates through both physical channels (jewellers, banks) and electronic platforms (commodity exchanges like MCX and NSE), linked to global markets.
Here’s a quick breakdown of the major forms of bullion:
Metal |
Purity Standard |
Common Form Used for Trade |
|---|---|---|
Gold |
99.5% or 24K |
Bars, coins, jewellery |
Silver |
99.9% |
Bars, granules, coins |
Platinum |
99.95% |
Bars, industrial plates |
Palladium |
99.95% |
Bars, coins |
Gold and silver dominate the Indian bullion market, largely due to cultural, industrial, and investment-driven demand.
The functioning of the bullion market depends on two main formats — physical and derivative (futures and options) trading.
This refers to the traditional buying and selling of gold and silver in physical form through jewellers, banks, and authorised dealers. Prices are influenced by global spot rates, currency movements, import duties, and domestic demand.
In the derivatives segment, investors trade contracts that derive value from the bullion price rather than exchanging physical metals. This includes:
Futures contracts: Agreements to buy/sell at a predetermined future date
Options contracts: Rights but not obligations to transact at a specified price
Exchange-Traded Funds (ETFs): Investment funds that mirror bullion prices
Platforms like Multi Commodity Exchange (MCX), National Commodity and Derivatives Exchange (NCDEX), and the India International Bullion Exchange (IIBX) facilitate these trades.
Bullion markets hold significant relevance in India's economy for various reasons:
Store of value: Gold is a hedge against inflation and currency depreciation.
Cultural significance: Used extensively in weddings, festivals, and religious functions.
Reserve asset: Held by central banks to back currency and manage reserves.
Here are the core advantages offered by the bullion market for different participants:
Hedge against inflation: Precious metals maintain value during economic downturns.
Portfolio diversification: Acts as a counterweight to equities and bonds.
Global pricing: Linked to international benchmarks, ensuring fair price discovery.
High liquidity: Easy entry and exit from both physical and futures markets.
Speculative opportunity: Derivatives offer potential for short-term gains based on price fluctuations.
Price risk management: Hedging via futures helps manage exposure to raw material costs.
India has a regulated ecosystem for bullion trade through these primary entities:
MCX (Multi Commodity Exchange): Offers gold and silver futures.
NCDEX (National Commodity & Derivatives Exchange): Primarily agri-focused but supports bullion.
The MCX bullion trading timings in India are as follows:
Session |
Time |
|---|---|
Morning |
9:00 AM – 5:00 PM |
Evening |
5:00 PM – 11:30/11:55 PM IST |
The market operates Monday to Friday. Settlement happens on a T+2 basis, which means the trade is settled two working days after the transaction date.
The Securities and Exchange Board of India (SEBI) regulates bullion exchanges to ensure transparency, safety, and investor protection. All registered brokers and dealers must comply with SEBI norms regarding margin requirements, transaction limits, and dispute resolution.
Understanding these commonly used terms will help navigate the market better:
Spot price: Current market price for immediate delivery
Troy ounce: Standard unit of bullion weight (1 troy ounce = 31.1035 grams)
Hallmarking: Certification of metal purity and authenticity
Price volatility: Driven by geopolitical issues, currency changes, and global demand
Storage and insurance: Necessary for physical gold; adds to the cost
Tax implications: Gains from bullion are taxable under capital gains provisions
Purity concerns: Always verify hallmark and source when buying physical bullion
The bullion market is crucial to India’s economy, serving as a hedge, cultural asset, and trading tool. Understanding its workings helps investors make informed decisions and manage risks effectively.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
Bullion refers to precious metals like gold and silver in bulk form, typically with high purity and traded by weight.
Yes, platforms like MCX offer futures trading, and ETFs also allow exposure to bullion prices.
On MCX, gold is traded in contracts of 1 Kg and smaller units like 100 grams (Gold Mini).
Yes, long-term capital gains from gold held over three years are taxed at 20% with indexation benefits.
IIBX allows qualified jewellers in India to directly import gold, improving price transparency and reducing costs.
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