Trade E-Gold National Spot Exchange (NSEL)

Details & Information about trading E-Gold as commodity on National Spot Exchange (NSEL)
It was recently when we covered the details about Trading E-Silver on National Spot Exchange. In this article, we will focus on another precious metal and the hot favourite of India for investment - Gold.
Traditionally, India has been known as the largest consumer of physical gold, and that continues till date. People have been buying Gold in physical form and storing it as an investment since long time. With the invest of electronic trading and other contracts, the gold investments have taken a new path. No more buying of physical gold, no more storing it in safe lockers, rather go the electronic way and get the gold investments safely into your demat account.

To enable such E-Gold trading, the National Spot Exchange (NSEL) has a good product called E-Gold which allows individual small investors to trade in Gold in electronic form, without having take physical delivery. There are many benefit of E-Gold trading and investments, which we will list below.

E-Gold Trading on National Spot Exchange (NSEL)

First, let's begin with the basic details of E-Gold Trading:
How can I trade E-Gold?
It's simple. Just open a demat account (like the one required for share trading) with a DP/Broker who has the membership to allow its clients to trade in the E-series on National Spot Exchange of India (NSEL). Once you get that, you can begin trading by simply placing your buy and sell orders through phone/internet, depending upon what channels your broker provides for trading and transactions.

What are the timings for E-Gold on National Spot Exchange (NSEL)?
This is a bit tricky part. The E-series products E-Gold (and E-Silver) have very long trading hours 10:00 AM to 11:30 PM - i.e. 13:30 hours of non-stop trading.
In one way, it is good as you can buy sell at the time you wish. However, it becomes difficult for traders to trade for such long time. Another issue is that all these commodities and their prices are influenced by international rates (Remember the recent fluctuations in silver prices). So if you are a trader and have bought E-Gold say at the price of 20,000 in the morning, it is quite possible that by the time the trading ends on the NSEL exchange, the prices may come down substantially. You need to be alert for this kind of trading fluctuations for long trading hours.
The trading days for NSEL for E-Gold trading are usually Monday to Friday (except Bank Holidays)

What will be the underlying unit for E-Gold?
Each E-Gold unit will be comprised on 1 Gram of pure gold with 995 purity level.

What is the lot size and tick size for E-Gold trading?
One can trade E-Gold in 1 unit and its multiples, and the maximum lot size is set to 10,000 units of E-Gold.
The tick size indicates the minimum price movement, and that is set to 10 paisa. That means, any price will have to be quoted in multiples of 10 paisa only for E-Gold trading.

What are the margin requirements for E-Gold Trading?
The exchange has set the initial margin as 5% and delivery margin as 10% for trading E-Gold.
However, depending upon the broker you wish to trade with, the margin requirements might vary, please confirm with your broker about that.

What is the settlement cycle for E-Gold?
E-Gold contracts follow T+2 settlement cycle.

What are the risks in trading E-Gold?
Please note that there is the general price fluctuation risk which is always there. We have seen that happening for Silver prices recently, and to some extent gold prices are also fluctuating. So whether your buy (go Long on E-Gold) or sell (go short on E-Gold), the price movement will affect your trading profits.
Then, as mentioned above there is the long trading hours risk. What if you purchase something at high price in the morning and it comes down substantially due to international price changes by the time the exchange closes?
Third, you need to accept the risk of international price changes which might happen overnight, when the exchange is closed.
Transaction costs will again be another thing to look at and it will vary from broker to broker.
Then, all the brokers you generally trade with, may not have NSEL membership for allowing trading in E-Gold. You may have to incure extra charges for trading on NSEL listed products

What are the other competitor products available in the market againsts E-Gold?
There are lots of Gold Based ETF's which one can consider. Since majority of the gold based ETF are listed on common exchanges like NSE and BSE, you can save charges for getting a NSEL exchange trading account - again, check with your broker. Here is the List of Gold ETF India available for trading on NSE

HDFC has its own HDFC Gold ETF

Then there is the good old Quantum Gold Fund (Gold ETF) and ICICI Prudential Gold ETF, then SBI GETS-SBI Gold ETF: SBI Gold Exchange Traded Scheme

Other than the Gold Based ETF's, there are some Gold based Funds, but do read the following articles to understand how they work, as they are not directly similar to E-Gold or Gold ETF. The recently lauched Reliance Gold Savings Fund (See Review & Details)

If you are interested in looking at how Gold prices have performed historically, see Gold ETF: Historical Performace of Gold ETF

Trade E-Silver National Spot Exchange (NSEL): Commodity Trading

There is some good news for the traders and investors who wish to bet their money on precious metal commodities. The National Spot Exchange of India has come out with a good product called E-Silver through which small investors as well as big investors can trade Silver on the NSEL. In this article, we will cover details about what is E-Silver, how it can be traded and what are the benefits of trading E-Silver as a commodity product.

Trading Silver as Commodity through E-Silver

Let's start with the basics first.
What is E-Silver?

E-Silver is a trading and investment product which is offerd by National Spot Exchange of India and aimed at offering trading as well as investment opportunities to small investors as this product can be traded with small amounts of money.
Till now, Precious commodities like Gold and Silver were being traded only in large quantities, so they were out of reach of common man or better to say small investors who wished to trade these commodities. Although Gold can be traded in small amounts through Gold based ETF's - see details, there was no similar product for trading silver. Now, through E-Silver, small traders and investors can bet their money on Silver prices and attempt to benefit from Silver trading.

What will be underlying the E-Silver as a product? How will E-silver trading work
This is the crux of silver trading. Silver can be traded through E-Silver in small quantities - like 100 grams and its multiples. So 1 unit of E-Silver will be the cost of 100 grams of Physical silver, as available in the market (around 2750 Rs. as of now). So this will allow small investors who can trade silver in small amounts.
Similar product called E-Gold which was launched by NSEL in March 2010 has also been a good success.

Why is E-Silver introduced?
Riding high on the success of E-Gold, the National Spot Exchange has offered similar product for Silver.
As we all know, silver prices in the recent past have given excellent returns. However, small investors have always been left out as there is no silver based ETF available for trading in India or any other silver based product suitable for trading and investing in silver in small amounts.
NSEL is trying to offer a silver based product so that small investors can also trade on silver prices.
Morever, this can also bring in a kind of uniformity in prices across the country, as silver prices will now be available (and can be referred benchmarked) against the E-Silver product prices, as trading goes on on NSEL. Irrespective of whether the silver trader is in Delhi or Kanyakumari, he will get the same price of silver across the geography.

How will E-Silver trading happen?
The price of E-Silver units will be in multiples of 10 paisa ticks.
Trading day will be for a long period - 10 AM to 1130 PM.
Settlement Cyce will be T+2

What are the risks involved in trading E-Silver?
Of course there is the risk of price movements. You may have a BUY position and then the price starts to go down, or vice versa, you will be in a loss.
Dont just go by the historical price rise. Market works randomly and what has been going up till now can start falling down. See Historical Performace of Gold ETF and how it has varied over long periods of time.
Also note that it will be a 13:30 hr long trading day. So from a trader's perspective, it will be a really long day and one will be required to keep close eye on his silver positions for long periods of time. Also note that Sivler prices are decided internationally.
Then, NSEL or National Spot Exchange is a relatively new exchange. Not all brokers provide trading in NSEL. So investors or traders who wish to bet their money on E-Silver, might have to spend money on opening accounts with the brokers who offer NSEL trading.
Transaction costs will again be another thing to look at and it will vary from broker to broker.