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Gold has long been viewed as a widely tracked asset due to its role in portfolio diversification and its ability to hold value during uncertain market conditions. Investors today can access gold through multiple avenues, ranging from physical ownership to market-linked instruments.
Among these options, gold futures allow participants to take price exposure without holding the metal directly. For those looking to buy MCX gold, futures trading offers an exchange-based method to participate in gold price movements through standardised contracts.
Key Takeaways
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MCX Gold enables exposure to gold prices through standardised futures contracts without physical ownership.
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Gold futures prices differ from spot prices due to global benchmarks, currency movements, and domestic cost factors.
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Multiple contract variants exist for different investment levels: Gold 1 kg, Gold Mini 100 g, Gold Guinea 8 g, Gold Petal 1 g, and the newly introduced Gold 10 g (Gold Ten).
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Understanding margins, contract expiry, and settlement rules is essential before trading.
What is MCX Gold?
MCX Gold refers to standardised gold futures contracts traded on a recognised commodity derivatives exchange in India. These contracts involve an agreement to buy or sell a specified quantity of gold at a predetermined price on a future date. The primary contract is based on 1 kg of gold, while smaller contract variants allow participation with lower quantities.
MCX Gold enables price exposure to gold without physical ownership. Contract prices are influenced by international gold benchmarks, currency movements, and domestic market factors, which may result in differences from local spot gold rates. Trading follows defined exchange specifications, applicable margin requirements, and settlement procedures.
How to Buy Gold in the MCX / Commodity Market
Let’s understand the process of trading gold in the commodity market through futures contracts:
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Activate the commodities segment in your trading account to enable gold futures trading.
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Complete the required formalities and ensure sufficient funds are available to meet trading obligations.
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Maintain the applicable margin as prescribed for the selected gold contract.
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Select the appropriate gold contract based on quantity and place a buy order at the chosen price.
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Monitor margin requirements regularly, as profits and losses are settled on a daily mark-to-market basis.
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Before expiry, square off the position or allow settlement to occur as per exchange-prescribed rules.
These steps explain how to buy gold from MCX using gold futures contracts.
How is the Price of Gold Futures Decided?
It is important to note that there is a difference in the price of physical gold and the indicated price of MCX GOLD. This is because MCX prices are determined by trading activity, as well as a variety of other variables, such as the international gold price, USD-INR rate, import duty, prevailing premium/discount, and the troy ounce-to-grams conversion. Also, gold futures contracts are for a specific time frame, while the physical gold market prices are spot rates, which explains the evident disparity.
A commonly accepted formula for the calculation of the MCX Gold price is as follows:
Quoted unit for Gold in the MCX exchange is 10 gms. 1 troy ounce is roughly 31.1 grams.
Hence, the Gold price calculation formula for 10 gm = (International Gold Price) x (USD to INR rate conversion) x 10 (Troy ounce to grams conversion)
Variants of Gold Contracts
There are five variants of gold contracts:
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Gold 1 Kg
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Gold Mini (100 gms)
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Gold Guinea (8 gms), and
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Gold Petal (1 gm)
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Gold Ten (10 g)
Let’s understand these variants a little better in the table below.
|
Parameters |
Gold |
Gold Mini |
Gold Guinea |
Gold Petal |
Gold Ten |
|
Contract Size |
1 kg |
100 gms |
8 gms |
1 gms |
10 g |
|
Maximum order size |
10 kg |
10 kg |
10 kg |
10 kg |
10 kg |
|
Tick Size |
₹1 / 10 grams |
₹1 / 10 grams |
₹1 / 10 grams |
₹1 / 1 gram |
₹1 per 10 g |
|
Expiry date |
5th Day of Expiring Month |
5th Day of Expiring Month |
Last Day of Calendar Month |
Last Day of Calendar Month |
Last calendar day |
Steps to Start Trading in MCX Gold
You will need to open a Commodity Account with a broker who is registered with MCX to begin trading in Gold Futures. Brokers like Angel One can help you to easily open such an account.
In case you already have an equity trading account with your broker, you can simply activate your commodity segment to begin trading in MCX Gold. You will need to submit either of the following documents to activate your commodity segment:
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Last 6 Months Bank Statement
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Demat Account Holding Statement
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Salary Slip
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Mutual Fund Statement
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Bank Fixed Deposit Receipt
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ITR Acknowledgement
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Form 16
To check which segments are active in your Angel One account, please visit your Profile section via the Angel One Mobile App or Web Trading platform.
Once your commodity account is active, simply look for the MCX Gold Contract you wish to buy or sell and place your order by entering the details needed, such as the Number of Lot(s), price, etc.
What Affects the Price of Gold?
Gold prices in the commodity market are influenced by a combination of global and domestic factors:
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International gold prices: Movements in global benchmark prices directly impact domestic futures pricing.
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Currency exchange rates: Changes in the USD–INR rate affect the landed cost of gold in India.
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Interest rates and inflation outlook: Lower real interest rates often increase demand for gold as a value-preserving asset.
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Geopolitical and economic uncertainty: Risk events can increase gold demand among those looking to buy MCX gold.
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Domestic duties and taxes: Import-related charges influence futures pricing for participants who buy MCX gold.
Advantages and Disadvantages of Gold Commodity Trading
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Advantages |
Disadvantages |
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Futures trading allows exposure to a higher gold value with a relatively lower capital outlay due to margin-based trading. |
Leverage can magnify losses, and adverse price movements may lead to margin shortfalls. |
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High liquidity in gold contracts supports smoother entry and exit during market hours. |
Global developments can cause price gaps when domestic markets are closed. |
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Exchange-based trading follows standardised contracts and transparent pricing mechanisms. |
Gold futures have fixed expiry dates, requiring timely position closure or settlement. |
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For participants looking to buy gold in MCX, futures can help manage price risk efficiently. |
Those who buy gold in MCX must understand tax treatment and settlement obligations to avoid surprises. |
Remember
Like all other investments, investing in Gold Futures also requires a thorough understanding of the asset and one’s own financial goals and risk appetite. While the benefits of investing in a commodity like gold seem attractive, it is important to make a well-informed decision while planning your finances.
Some Related Terms
Spot gold: It refers to a trade in which gold is purchased immediately, i.e., on the spot.
Spot price: The price is determined immediately, and the product and cash are interchanged almost instantly.
Strike price: The strike price of an option is the price at which a put or call option can be exercised.
Tick size: It is the minimum price change between the different bid and offer prices of an asset traded on an exchange platform.
Tick price: It is the minimum price difference that must exist at all times between consecutive bid and offer prices. In other words, it is the minimum increment in which prices can change.
Conclusion
MCX Gold futures offer a structured way to gain exposure to gold prices without physical ownership. Understanding contract specifications, pricing factors influencing the MCX gold rate, margin obligations, and settlement rules is essential. This helps investors assess risk, manage positions effectively, and make decisions that align with their financial objectives and risk tolerance.
