Open interest (OI) and pending contracts ready for execution caused gold hit an all-time high on the Multi Commodity Exchange (MCX) On Thursday.
Traders’ shifting from physical holding of the yellow metal to profit-making also led to a rise in the gold prices.
Due to the absence of retail traders in the market, jewellery makers and long traders are selling their holdings on the futures platform at the current price. As the delivery date is two months away, goods will be delivered if the prices decline or if the positions are squared off in case prices rise.
In both cases, gold holders will benefit, said Navin Mathur, head-Commodities of Angel Broking.
Total open interest was recorded at over 23 tonnes as the April contract witnessed 21,870 kg, June 1101 kg, August 62 kg and October 7 kg towards the end of the morning session On Thursday. It breached its own record of 21 tonnes these contracts had set about 10 days ago.
On the MCX, a trader needs to pay a minimal 6 per cent of margin for entering into a large deal unlike physical buying where he requires total upfront money.
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In Mumbai physical markets, however, standard gold set another history by closing with a gain of Rs 315 on Thursday at Rs 14,705 per 10 gm. Pure gold also set its record of Rs 14,770 per 10 gm, a gain of Rs 320 from the previous close of Rs 14,450 per 10 gm.
On the MCX, however, gold for near month delivery hit Rs 14,900 per 10 gm early Thursday evening giving a fair chance for analysts to forecast breaching Rs 15,000 per 10 gm soon.
Gold may breach Rs 15,000 per 10 gm before any profit booking in near future. Overall, traders are bullish towards the yellow metal, said Mathur.
In Delhi bullion market, the yellow metal rose Rs 350 to close at Rs 14,900 per 10 gm. Retail investors and physical consumers stayed away from fresh buying.
The yellow metal moved up in Indian markets because of a firm guidance from overseas markets where gold shot up to $943.70 an ounce, highest since July 2008, in line with the forecast made by the London-based research firm Gold Field Minerals Services (GFMS).
GFMS had last month predicted that the gold price may touch $1000 an ounce during the first half of this year on huge festival demand from India and investors’ safe haven investment in global economic downturn.
Despite the US government is considering $900 billion stimulus package and Chinese government currently investing the second part of $535 billion booster package, gold prices are rising. This indicates that investors’ have not yet re-stored their confidence towards shaky outlook of other asset classes, said an analyst.
A little profit booking was witnessed in Tokyo with yellow metal slipped 0.3 per cent to $935 an ounce after spiking to the peak of $953 an ounce on Wednesday. It’s hardly 7.5 per cent below the lifetime high of $1,030.80 the precious metal had struck last March, when record oil and uncertainties in the dollar’s outlook spurred buying.
Meanwhile, gold holdings of SPDR, the world’s largest gold-backed exchange-traded fund, rose 4.5 per cent, to a record 935.09 tonnes on Wednesday.
The downward sentiment in currency market is adding to investors’ worries resulting into more attraction towards gold, Mathur added. The dollar fell 0.30 per cent on Thursday against Indian currency to the level of 48.84 from the previous close of 48.70.