Introduction
Understanding how the MCX physical delivery process works for gold and silver in India is essential for any trader or merchant who holds positions into expiry. MCX contracts are not purely financial instruments — they carry a legally enforceable obligation to give or take delivery of standardised metal if positions remain open at expiry.
The Mechanism
When an MCX Gold or Silver contract approaches its expiry date, open positions that are not squared off enter a compulsory delivery window. MCX Gold trades in 1 kg lots (priced in ₹ per 10g), so one lot represents ₹ price × 100 units of 10g.
The settlement price is anchored to import parity:
MCX Gold (₹/10g) = (COMEX $/troy oz ÷ 31.1035) × 10 × USD/INR × 1.12
That 1.12 multiplier captures the post-July 2024 duty structure: 6% Basic Customs Duty, 3% Agriculture Infrastructure Development Cess, and 3% GST. Sellers must tender metal that meets MCX-specified purity (995 fineness for gold) in SEBI-approved vaults — currently operated by Brinks, Sequel, and similar accredited custodians. Buyers receive a vault receipt, not physical metal at the exchange counter. Transfer of ownership occurs electronically; the buyer then arranges collection or re-sale from the vault. Any mismatch between the futures settlement price and actual spot procurement cost is the basis risk traders carry into delivery.
India-Specific Context
India's MCX gold price behaves differently from COMEX because three independent variables sit between them: the USD/INR exchange rate, import duty, and GST. A flat COMEX price still produces MCX movement if the rupee weakens — each 1-rupee depreciation against the dollar adds roughly ₹500–₹600 per 10g at current price levels. Import duty is a government policy lever; a 1% duty change shifts MCX by approximately ₹1,000 per 10g. This is structurally different from Western futures markets where no import barrier exists. Additionally, SEBI limits who can participate in delivery — only entities with a valid PAN, KYC, and in some cases an import licence for commercial quantities. Jewellers and bullion dealers frequently use this route to source metal at a regulated, transparent price rather than relying on spot dealers.
Historical Episodes
In 2020, during peak COVID-19 uncertainty, COMEX gold surged roughly 28% across the calendar year. MCX Gold amplified this move to approximately 32–35% in rupee terms because the rupee simultaneously weakened past ₹76/USD, demonstrating how the two multipliers compound. In 2022, when the government reduced import duty from 12.5% to 10.75% (and later adjusted further), MCX Gold corrected nearly ₹2,000–₹2,500 per 10g within days of the budget announcement, even while COMEX remained largely stable — a clean demonstration of the duty-as-price-lever mechanism. In 2023–24, sustained central bank buying, particularly by the Reserve Bank of India and People's Bank of China, supported COMEX gold above $2,000/oz for an extended period; MCX correspondingly held elevated levels, with the MCX-COMEX spread staying tight because USD/INR was relatively stable.
What to Watch
Monitor these specific signals before delivery windows open: COMEX Gold settlement (CME Group, 1:30 AM IST); US 10-Year TIPS yield (daily, Bloomberg/Fed); RBI reference USD/INR rate (published 1:30 PM IST on RBI website); Union Budget and Mid-Year Economic Review for duty announcements; World Gold Council quarterly central bank demand data; MCX contract expiry calendar (published on mcxindia.com); MCX daily circuit limits (currently ±6% for gold); and SEBI circular updates on vault accreditation or delivery norms, which can alter logistics costs and therefore the effective basis.