How can retail investors benefit from trading in bullion through the National Spot Exchange? 
Anjani Sinha
An investor wants access to a market where he can trade in a transparent manner. This exchange provides such a mechanism, where payment and quality are guaranteed. The USPs of our model are transparent prices, buy-back arrangement and guarantee of delivery, payment, purity and weight. As a result, there has been a consistent rise in trading volumes.
How should one invest in gold—as bars, coins, exchange traded funds or jewellery?
An investor has multiple options, but he should chose one with the least entry and exit costs. In case of jewellery, he pays for making charges while purchasing and deductions due to impurity while selling, resulting in a cost of 6-10 per cent. If he invests in a gold ETF, the entry and exit costs are around 2 per cent and there is a recurring holding cost of nearly 4 per cent per annum. If he buys imported gold coins from banks, there is a premium of nearly 10 per cent besides the price of gold. Also, banks don't provide the buy-back facility. If he buys or sells gold through NSEL, the cost is around 0.1 per cent, and if gold is held in our vault, the annual recurring holding cost is only 0.5 per cent.
The central bank recently talked of money flowing to asset classes, including gold. Do you foresee an asset bubble in the near future? Is a correction due?
Gold is a proven hedge against inflation. However, it is not a leveraged product and, hence, price rise in gold cannot be considered a bubble. On the contrary, it is based on serious investment. Fundamentally, the price rise is linked to the US economy, which is still not in a good shape, resulting in the weakening of dollar against other currencies. The result is price rise in gold in dollar terms. There could be a correction in prices, but such corrections are not based on any bubble.
Silver has outperformed gold in the last year. Do you think this trend will continue?
The bullion market is dynamic and pricing depends on several factors. However, it is also a fact that gold is above its historical peak, while silver is still far below its all-time peak. Therefore, technically, the scope of rise in the price of silver is more than that of gold.
Who provides the guarantee for the traded gold?
Guarantee is provided regarding quality, purity, fineness, weight and payment by the exchange. It provides counter-party guarantee (if a buyer defaults, the seller is protected and vice versa) with respect to all trades and deliveries executed on our platform.
What's the lot size for gold/silver available for trading?
The lot sizes for gold are 8 gm coin and 1 kg bar. Silver is traded as 15 kg and 30 kg bars and as granules (balls weighing 25-50 gm, available in 1 kg packets). The transaction fee is Rs 20-100 per lakh of turnover.
(Anjani Sinha is the MD and CEO of National Spot Exchange Limited)
