Page 21 - Bullion World issue 2 June 2021
P. 21
Bullion World | Issue 02 | June 2021
Commodity Risk
Management and the
use of options for
hedging in
Bullion industry
Ms. Ashwini Bansod, Head
Commodities Research,
PhillipCapital India
" To manage the
commodity price
risk in bullion sector,
participants look
forward to hedging Commodity price risk is the uncertainties unbranded), exporters and retail
with instruments on faced by the industry participants to consumers.
source or sell a product at a price.
exchanges where Commodity price risk include inventory Producers such as miners face the risk
their prices share a price risk (risk of falling prices), margin from falling commodity prices whereas
strong correlation with risk (for a producer from falling prices consumers that of rising prices.
domestic benchmark and a consumer from rising prices) and To manage the commodity price risk
in bullion sector, participants look
basis risk (difference in benchmark spot
and international price and derivative contract price, used forward to hedging with instruments
" Depending on their respective placement benchmark and international prices.
prices. to hedge risk). on exchanges where their prices share
a strong correlation with domestic
in value chain, price volatility can have
India, practically imports all of its gold
varying impact on the above participants
and force changes in business strategy
price taker and as result, international
as well as competition in the sector. and silver requirements and hence is a
benchmarks such as CME-Comex and
Bullion industry (gold and silver) LMBA, closely influence domestic prices.
participants include miners, importers,
traders, jewelers (branded and
Source: Bloomberg
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