RBI Eases Gold Price Risk Hedging Rules in IFSC

• 19 Apr 2024

On 15th April, 2024, RBI relaxed regulations, permitting resident entities to hedge gold price risk using OTC derivatives in IFSC, enhancing risk management flexibility.

Key Points

• Regulatory Relaxation: RBI eased rules, enabling resident entities to hedge gold price risk through OTC derivatives in IFSC, in addition to exchange-traded derivatives.
• Expanded Opportunities: Directive provides additional avenues for gold price risk hedging, offering enhanced flexibility to resident entities.
• Regulatory Framework: RBI issues directive titled 'Master Direction – Foreign Exchange Management (Hedging of Commodity Price Risk and Freight Risk in Overseas Markets) Directions, 2022,' outlining regulations for gold price risk hedging.
• Risk Management Enhancement: Central bank aimed to facilitate more efficient risk management strategies amidst evolving market conditions.
• Safe-Haven Demand: Amid geopolitical uncertainties, investors turn to safe-haven assets like gold, driving increased interest in gold price risk hedging.
• Gold as a Hedge: Gold serves as a valuable asset and a widely utilized hedging instrument against inflation and economic uncertainty