An account quoted in dollars beside a purchase made in rupees

An account quoted in dollars beside a purchase made in rupees

A trading account with FxPro is denominated in dollars, while a gold purchase in India is denominated in rupees. The two are not the same thing: one is a position in a financial instrument, the other is a purchase of metal at a shop counter. The account's value moves with the dollar price of gold and the dollar-rupee exchange rate, but it does not give the holder a claim on any metal.

The account is a contract for difference, which means it is settled in the account's currency and carries no claim on any metal. No metal is delivered and none is stored. A reader who opens such an account is not buying gold; they are entering a financial contract whose value tracks a gold price. The difference between that and buying a gram of gold at a shop is the difference between a price exposure and a purchase.

What disappears from the cost of a trade when no metal moves

When no metal moves, the costs of moving metal disappear. There is no import duty, no landing charge, no making charge and no GST on the purchase. The only costs are those charged by the broker, which may include a spread, a commission or a financing charge. A reader should not assume that a contract for difference is cheaper than buying gold; it is a different instrument with a different cost structure.

The absence of metal also means the absence of the services that come with metal. A shop's price includes the cost of stocking, securing and selling a physical asset. A contract for difference has none of those costs, but it also has none of the protections. A reader who buys gold at a shop owns an asset; a reader who holds a contract for difference owns a promise from a broker. The two are not interchangeable.

What a reader should confirm in the platform itself

Opening an account requires identification and takes a day or two. A practice account exists and costs nothing. A reader who considers opening an account should confirm the costs in the platform itself: the spread, any commission, and the financing charge for holding a position overnight. These are not published on this site and are not estimated here.

A reader should also confirm the settlement currency, the margin requirements and the circumstances in which a position can be closed. The account is with FxPro, an international broker; this site is not the broker and takes no money from the reader. Nothing on this page should be read as a recommendation to open an account. It is a description of what the account is and what a reader should check.

FxPro is regulated by the FCA (United Kingdom) and CySEC (Cyprus). It is not registered with SEBI and is not regulated in India. Indian residents should note that remittances made under the Liberalised Remittance Scheme may not be used for margin trading, and nothing on this site is investment advice.