Financial Daily from THE HINDU group of publications
Saturday, Apr 22, 2006
Financial Daily from THE HINDU group of publications Saturday, Apr 22, 2006 |
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Agri-Biz & Commodities - Commodity Markets Turmoil in bullion market G. Chandrashekhar
In Multi-Commodity Exchange of India (MCX), which dominates the bullion futures trade, May contract silver collapsed to Rs 18,589 per kg from the day's high of Rs 23,148/kg, a fall of nearly 20 per cent. Gold prices (June contract) fell by Rs 700 to the day's low of Rs 8,917 per 10 gm.
Mumbai , April 21 Thursday's sharp volatility in the international precious metals market and steep correction of prices downward has had its ripple effect on Indian commodity bourses. Prices of both gold and silver moved down in tandem even as the slide was swift and unexpected.
Most market participants were taken by surprise and were ill-prepared to face the massive price fall which forced them to arrange for large amounts overnight and deposit before trading hours today as `mark-to-market'. According to conservative estimates, traders had to deposit about Rs 400 crore in case of gold and over Rs 500 crore in case of silver with the exchanges. Given the international nature of the commodity, bullion derivatives are traded here till 11.00 p.m. In Multi-Commodity Exchange of India (MCX), which dominates the bullion futures trade, May contract silver collapsed to Rs 18,589 per kg from the day's high of Rs 23,148/kg, a fall of nearly 20 per cent. Gold prices (June contract) fell by Rs 700 to the day's low of Rs 8,917 per 10 gm.
FMC relaxes price band
Meanwhile, in view of unprecedented volatility, the futures regulator — Forward Markets Commission — has relaxed the price band. It was raised from 9 per cent to 22 per cent, according to a market participant and the decision came to the market at about 7.50 p.m. Also, as part of risk management exercise, margins on bullion trades have been raised by the exchanges with a view to containing the heat of the market. Interestingly, both the online nationwide exchanges recorded a massive increase in turnover of bullion (gold and silver) on Thursday. While MCX had a turnover of about Rs 15,000 crore, the National Commodity and Derivatives Exchange recorded Rs 4,000 crore. In the Mumbai spot market, silver closed on Thursday at Rs 22,950/kg and on Friday was down by nearly 15 per cent to Rs 19,605/kg. Gold (standard) which traded at Rs 9,500/10 gm on Thursday was down to Rs 9,170 today.
Bad effect on demand
Even as domestic demand for gold and silver has considerably slowed down in recent weeks because of soaring prices, this kind of sharp volatility is likely have a further unsettling effect on demand, according to a leading player. It has been some time since both gold and silver stopped moving on the basis of demand-supply fundamentals. Non-fundamental factors such as geo-political concerns, inflation and role of funds influence prices in the international market. The Indian market closely follows overseas price trend.
Related Stories: More Stories on : Gold & Silver | Commodity Markets | Commodity Exchanges
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