Gold Part-1

8.1 Understanding the Gold Contract on MCX

Varun: Isha, I’ve been hearing a lot about gold trading on MCX. Is it really that popular?

Isha: Very popular, Varun. Gold is one of the most traded commodities in India, especially the big gold contract.

Varun: Big gold? Are there other types too?

Isha: Yes, MCX offers different gold contracts—Big Gold, Mini, Guinea, and Petal. Each one suits different traders based on budget and goals.

Varun: That sounds useful. Can we start with the main one?

Isha: Sure. Let’s first understand how the standard gold contract works. Once you get that, the rest will be easy to compare.

Gold is one of the most actively traded commodities on the Multi Commodity Exchange (MCX), offering high liquidity and consistent market participation. Among the various gold contracts available, the standard variant, commonly referred to as “Big Gold” dominates in terms of volume. On average, approximately 15,000 contracts are traded daily, representing a notional value exceeding ₹4,500 crore. These figures pertain solely to the Big Gold contract, underscoring its significance in the Indian commodity market.

MCX offers multiple gold contract variants to cater to different trading needs and capital capacities. These include:

1. Gold (Standard or Big Gold)
2. Gold Mini
3. Gold Guinea
4. Gold Petal

Each of these contracts is based on the same underlying asset—physical gold—but differs in terms of lot size, margin requirements, and target participants. It is common for both novice and experienced traders to feel uncertain about which variant to choose, especially without a clear understanding of their specifications.

To address this, the module begins by examining the contract structure of the standard Gold contract. This foundational understanding will make it easier to compare and interpret the specifications of the smaller variants that follow.

The price quotation for the Gold contract on MCX is based on 10 grams of gold. Importantly, this quoted price is inclusive of all applicable import duties and taxes. While the breakdown of these charges will be discussed in later sections, learners should note that the MCX price reflects the full landed cost of gold in India.

Subsequent lessons will explore the remaining gold variants in detail, highlighting their unique features and trading considerations. This structured approach ensures clarity and helps traders make informed decisions based on contract suitability and market conditions.

8.2 Gold Futures Contract Specification Overview

Varun: Isha, now I’m curious about gold futures. How do they work?

Isha: Great move, Varun. Gold is one of the most traded commodities on MCX, especially the standard 1 kg contract.

Varun: Sounds big. Is it very different from currency futures?

Isha: Not really. The basics are similar—price quotes, margins, tick size—but gold has its own rules for delivery and expiry.

Varun: Okay, walk me through the main points. I want to understand how to trade it properly.

Isha: Sure. Let’s start with how the gold contract is priced and how much margin you need.

The Multi Commodity Exchange (MCX) offers standardized gold futures contracts, and understanding their specifications is essential before exploring other variants. To ensure clarity, each contract parameter will be discussed sequentially, beginning with the price quotation.

The price quotation for gold futures on MCX is based on 10 grams of gold, and this quoted price is inclusive of all applicable taxes and import duties. This means the price reflects the full landed cost of gold in India, making it a comprehensive benchmark for domestic trading.

A snapshot of the contract’s last traded price can be observed directly on the MCX trading platform. This real-time data helps traders assess market sentiment and plan entries or exits accordingly.

Subsequent sections will break down the remaining contract parameters—lot size, tick size, expiry, and delivery logic—to build a complete understanding of how gold futures function on MCX. This foundational knowledge will also aid in comparing other gold variants such as Gold Mini, Gold Guinea, and Gold Petal.

Trading the Standard Gold Futures Contract on MCX

1. Price Quotation

Gold futures on MCX are quoted in Rupees per 10 grams, inclusive of all applicable import duties and taxes. For example, if the last traded price is ₹60,000 per 10 grams, this reflects the full landed cost of gold in India.

2. Contract Value Calculation

The lot size for the standard Gold contract is 1 kilogram (1000 grams). To calculate the total contract value:

Example:

3. Margin Requirement

The margin required to trade one lot of Gold futures is typically a percentage of the contract value. If the exchange prescribes a 7% margin, then: This amount must be deposited to initiate a position.

4. Tick Size and Profit/Loss per Tick
   • Tick size: ₹1
   • Quotation unit: 10 grams
   • Lot size: 1000 grams

P&L per tick = (Lot Size ÷ Quotation Unit) × Tick Size

Applied to Gold Futures on MCX:

• Lot Size = 1000 grams
• Quotation Unit = 10 grams
• Tick Size = ₹1

P&L per tick = (1000 ÷ 10) × 1 = ₹100

This means for every ₹1 movement in price, the trader gains or loses ₹100 per lot.

So, for every ₹1 movement in price, the trader gains or loses ₹100 per lot.

5. Expiry and Contract Cycle

• Expiry: 5th day of the contract month
• Contract cycle: New contracts are introduced every two months and remain active for one year
• Available contracts: Six at any given time

For example, if the current month is October 2025, the most liquid contract would be December 2025. Upon its expiry on 5th December, a new October 2026 contract will be introduced.

6. Delivery Logic

• Settlement type: Physical delivery
• Delivery unit: 1 kilogram
• Intent to deliver: Must be expressed at least four days before expiry (i.e., by the 1st of the expiry month)

If a trader holds 10 lots and opts for delivery, they will receive 10 kilograms of gold. However, many traders prefer to square off positions before the delivery window to avoid physical settlement.

Summary Formulae

8.3 Key Takeaways

• MCX and NCDEX are India’s main commodity exchanges, with MCX focusing on metals and energy, and NCDEX on agricultural products.
• Global exchanges like ICE and CME handle a wide range of commodities and financial derivatives, offering global exposure.
• Gold is the most traded commodity on MCX, with multiple contract variants like Big Gold, Mini, Guinea, and Petal to suit different traders.
• Standard gold futures on MCX are quoted per 10 grams, have a 1 kg lot size, and are physically settled.
• Understanding contract specs—like tick size, margin, and expiry—is crucial

8.5 Fun Activity

You’re now a market analyst helping different clients choose the right commodity and exchange. Match each client to the most suitable commodity and the correct exchange (MCX or NCDEX).

Client Profiles:

1. Rajesh, a jeweller in Mumbai, wants to hedge against gold price fluctuations.
2. Meera,a farmer in Punjab, wants to lock in prices for her mustard seed harvest.
3. GlobalFuel Ltd, an energy company, wants to manage crude oil procurement costs.
4. AgroFresh, a food distributor, wants to track chana (gram) prices for bulk purchases.
5. TechMetalsInc, a manufacturer of copper wires, wants to hedge against rising copper prices.

Commodity & Exchange Options:

Answer Match the Clients: