RBI Eases Gold Price Risk Hedging Rules in IFSC

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