Gold vs Silver Trading in India: MCX Contracts, Lot Sizes and Tax

Where Gold and Silver Actually Trade in India

The single most important correction for any Indian trader is this. Gold and silver futures and options trade on the MCX (Multi Commodity Exchange of India), not on the NSE or the BSE. The NSE and BSE are equity and equity derivative exchanges. They do list gold ETFs and silver ETFs, which are units you buy like a share, but the leveraged contracts that most active commodity traders use are MCX products. If a guide tells you to buy a gold future on NSE or BSE, that guide is wrong, and following it will only confuse your broker order window.

MCX is regulated by SEBI, which took over commodity derivatives regulation from the former Forward Markets Commission in 2015. So the regulator is the same one that oversees your equity trades, but the venue and the contract rules are different. To trade MCX gold or silver futures you need a trading account with a broker that offers the commodity segment, and you must specifically enable that segment. Many traders open an account, try to search for gold futures, and find nothing, simply because the commodity segment was never switched on.

There is also a smaller venue, NSE has a commodity segment of its own, but the deep liquidity, the tightest spreads, and the contracts almost every Indian gold and silver trader actually uses are on MCX. For practical purposes, when you think gold or silver futures in India, think MCX first.

MCX Gold and Silver Contracts and Their Real Lot Sizes

This is where most generic articles fail traders. They skip the actual contract sizes, which are the numbers you live or die by. On MCX there are several gold contracts and several silver contracts, each with a different quantity, tick size, and price quote. Choosing the wrong size is the fastest way to blow up a small account, because the rupee value of a one rupee price move scales directly with the contract quantity.

Read that table carefully, because the price quote basis is a common trap. Gold is quoted per 10 grams, but the main Gold contract is 1 kilogram, which is 1000 grams, that is 100 units of 10 grams. So if the gold price shown on your screen moves up by Re 1 (per 10 grams), one Gold contract gains Rs 100. Silver is quoted per 1 kilogram, and the main Silver contract is 30 kilograms, so a Re 1 move in the quoted silver price changes the contract value by Rs 30.

For a beginner or a small account, the sensible entry points are Gold Mini (100 grams) and Silver Mini (5 kg), or even the smaller Gold Guinea and Silver Micro. Jumping straight into the full 1 kg Gold or 30 kg Silver contract means a normal daily swing can move your position by tens of thousands of rupees, which is far too much risk for a small account.

A Fully Worked Example: One MCX Gold Mini Trade

Numbers make this concrete. The figures below are illustrative, chosen to show the mechanics, not a forecast. Say gold on MCX is quoted at Rs 72,000 per 10 grams. You expect a move up and buy one Gold Mini future, which is 100 grams. Because 100 grams is ten units of 10 grams, one Gold Mini moves Rs 10 for every Re 1 change in the quoted price.

The full contract value is Rs 72,000 divided by 10 grams, times 100 grams, which equals Rs 7,20,000. You do not pay all of that. MCX gold typically needs roughly 6 to 9 percent margin, so assume about Rs 50,000 of margin blocks the position. Now suppose the price rises to Rs 73,000 per 10 grams, a move of Rs 1,000.

• Gross profit: Rs 1,000 price move times Rs 10 per point, which is Rs 10,000.
• Brokerage: a typical flat Rs 20 per executed order, so Rs 40 for buy plus sell.
• Commodity Transaction Tax (CTT): 0.01 percent on the sell side only. Sell value about Rs 7,30,000, so CTT is about Rs 73.
• Exchange transaction charges plus GST and stamp duty: roughly Rs 60 to Rs 120 combined for this round turn.
• Net profit: roughly Rs 10,000 minus about Rs 260 of costs, leaving close to Rs 9,740, illustrative.

Now flip it. If gold instead fell Rs 1,000 to Rs 71,000, the same Gold Mini position would show a gross loss of Rs 10,000 before you even pay costs. That symmetry is the whole point of leverage. With about Rs 50,000 of margin controlling Rs 7,20,000 of gold, a 1.4 percent price move against you wipes out roughly a fifth of your margin. This is why a stop loss is not optional on MCX, it is survival.

A Silver Example, and Why Silver Punishes Oversizing

Silver deserves its own worked example because the big contract is large and the metal is genuinely more volatile than gold. Suppose silver on MCX is quoted at Rs 90,000 per kilogram and you trade one Silver Mini, which is 5 kg. One Silver Mini moves Rs 5 for every Re 1 change in the quoted price. The contract value is Rs 90,000 times 5 kg, which is Rs 4,50,000.

Silver can easily move 2 to 3 percent in a single session. A 2 percent move on a Rs 90,000 price is Rs 1,800. On one Silver Mini that is Rs 1,800 times Rs 5, which equals Rs 9,000 of profit or loss in a day, illustrative. Now picture the same 2 percent move on the full 30 kg Silver contract. There each Re 1 move is Rs 30, so a Rs 1,800 move is Rs 1,800 times Rs 30, which is Rs 54,000 in a single session. That is why traders who pick the 30 kg silver contract with a small account so often get carried out. Same percentage move, six times the rupee swing of the Mini.

Gold vs Silver: A Side by Side Comparison

Gold and silver are both precious metals, but as trading instruments they behave very differently. Gold is the calmer, larger, more institutional market and a classic safe haven. Silver is smaller, more volatile, and carries heavy industrial demand from solar panels, electronics, and electric vehicles, so it reacts to both fear trades and the industrial cycle. The table below summarises the practical differences for an MCX trader.

A useful market saying is that silver is gold on leverage. The two prices usually move in the same direction, but silver exaggerates the move. The gold to silver ratio, the price of gold divided by the price of silver, is watched by many traders. When that ratio is historically high, some traders favour silver expecting it to catch up, and when it is low they lean toward gold. Treat the ratio as one input among many, not a magic signal.

Margins, Expiry and Delivery on MCX

MCX gold and silver futures have monthly expiries, and you must know your contract's expiry before the date arrives. The big risk for casual traders is compulsory delivery. MCX gold and silver contracts are deliverable, which means if you hold a long position into the tender or delivery period without intending to take physical metal, you can be obliged to pay the full contract value and receive bullion, or face penalties. In practice almost all retail traders close or roll the position well before the delivery window opens.

Margins on MCX work like equity futures. You post SPAN plus exposure margin to open a position, and the exchange can raise margins during volatile periods. For overnight positions you usually need the full margin, while some brokers allow lower intraday margins that must be squared off before the commodity session closes. The MCX session runs late into the evening, typically until around 11:30 pm or 11:55 pm depending on daylight saving in the United States, because international metal prices set the tone.

• Check your contract's expiry date and tender period the day you enter, not the day before expiry.
• Square off or roll well before the delivery window unless you genuinely want physical bullion.
• Expect margins to rise on volatile days, and keep spare cash so you are not force closed.
• Remember the late MCX evening session, where global cues can gap your position after equity markets have shut.

Taxes on Gold and Silver in India, Done Correctly

Tax treatment depends entirely on which instrument you used, and this is where many guides give outdated numbers. The old rule of a 36 month holding period for long term status on gold no longer applies after the 2024 Budget changes. Use the categories below.

Two points traders get wrong. First, MCX commodity futures are non speculative business income, not speculative income, because they are settled on a recognised exchange. That matters, because non speculative losses can be set off against most other business income, while speculative losses can only offset speculative gains. Second, physical and ETF metal held over 24 months is now taxed at 12.5 percent long term, not the older 20 percent with indexation. For equities the LTCG is 12.5 percent above a Rs 1.25 lakh yearly exemption, but that specific exemption is an equity feature, so do not assume it covers your gold ETF in the same way. When in doubt, confirm with a qualified tax adviser, because your total income and instrument mix decide the final number.

What Moves Gold and Silver Prices

Both metals are priced internationally in US dollars, so the Indian rupee price has two engines: the global dollar price and the USD to INR exchange rate. A weaker rupee pushes domestic gold and silver up even when the dollar price is flat, and a stronger rupee does the opposite. This is why an Indian trader can see gold rise in rupee terms on a day the international price barely moved. Always separate the metal move from the currency move when you review a trade.

Beyond currency, the big drivers are US Federal Reserve interest rate expectations, because gold competes with interest bearing assets and tends to rise when real yields fall. Add central bank buying, which has been strong in recent years, safe haven demand during geopolitical stress, and for silver specifically the industrial cycle through solar, electronics and electric vehicles. Indian festival and wedding season demand lifts physical and jewellery buying, which can support prices into the autumn and winter months.

• USD to INR exchange rate, often the largest single driver of the rupee price.
• US Federal Reserve policy and real interest rates, key for gold.
• Central bank gold buying and broad safe haven demand during crises.
• Industrial demand for silver from solar, electronics and electric vehicles.
• Indian import duty changes and the festival and wedding season demand cycle.

Common Mistakes Indian Gold and Silver Traders Make

The most expensive mistake is the one this guide opened with, looking for gold or silver futures on NSE or BSE and either trading the wrong product or trading nothing at all. Once you are on MCX, the next mistake is picking the wrong contract size. A new trader who buys the full 30 kg silver contract on a small account is taking position risk far beyond their capital, and a single ordinary day can erase the account.

Other recurring errors include ignoring the delivery and tender period and getting trapped near expiry, confusing the quote basis (gold per 10 grams, silver per kilogram) and so miscalculating profit and loss, and forgetting the late MCX evening session where overseas news can move a position after the stock market has closed. Finally, many traders treat gold and silver as identical, when silver's higher volatility demands smaller size and tighter risk control.

• Trading on the wrong exchange. Futures are MCX, not NSE or BSE.
• Oversizing, especially the full 30 kg silver or 1 kg gold contract on a small account.
• Holding into the tender period and being forced into physical delivery.
• Mixing up the price quote basis and miscomputing rupee profit and loss.
• No stop loss, then averaging down into a losing leveraged position.

How to Start, Step by Step

Getting set up correctly removes most of the early frustration. The order of steps below matters, because the commodity segment and the contract choice are the two things beginners skip.

• Open a trading account with a SEBI registered broker that offers the commodity segment, then explicitly enable that segment.
• Start with the smallest sensible contract, Gold Guinea or Gold Mini for gold, Silver Micro or Silver Mini for silver.
• Decide your per trade risk in rupees first, then size the position so a stop loss caps that loss.
• Confirm the current lot size, tick size and margin on the official MCX contract page before placing the order.
• Track every trade in a journal, including entry, stop, exit, costs and the reason, so you can review and improve.
• Square off or roll before the tender period unless you intend to take or give physical delivery.

If leverage feels too aggressive while you learn, start with a gold or silver ETF on NSE or BSE. There is no leverage and no delivery risk, you simply own units that track the metal. Once you understand how the metals move and how your own risk control holds up, you can graduate to MCX Mini or Micro futures with a clear plan and a defined stop on every trade.

Sources and Further Reading

For authoritative contract specifications, lot sizes, expiry and margin rules, always check MCX (Multi Commodity Exchange of India), the regulator SEBI, the Income Tax Department for current capital gains and business income rules, and CBIC for GST and customs duty. All figures in this guide are illustrative and meant to teach the mechanics. Confirm live contract specs, margins and tax rules on the official source before you trade, and never treat any example here as a promise of returns.

Sources and Further Reading

For authoritative data and further reading on this topic, refer to MCX (Multi Commodity Exchange), Income Tax Department, SEBI (Securities and Exchange Board of India) and CBIC. Always confirm current rules, rates and contract specifications on the official source before you trade.