Increased volatility in gold and silver prices during the last few days have resulted in losses for traders on the Indian futures exchanges. Prices of the precious metals had fallen 6-7 per cent on Thursday but rebounded sharply in the last two days.
While gold prices went up by Rs 1,135 yesterday, on Saturday it rose by 3.21 per cent or Rs 860 to close at Rs 27,665 per 10 gram after falling by Rs 1,840 on Thursday. Silver also went up by Rs 3,895 per kg to close on Saturday in Mumbai’s spot market at Rs 64,440. It had gone down Rs 3,785 per kg on Thursday.
The rebound followed a rise in bullion prices internationally with renewed demand for the metals. The US Federal Reserve chairman had said yesterday that the central bank was “prepared to employ its tools as appropriate to promote a stronger recovery”, dropping a broad hint that the US central bank would soon do more to support an ailing economy. This prompted more buying in gold and silver. Gold was last quoted at $1,828.
| UPS AND DOWNS MCX Silver Futures data for near month future | |||
| Date | Session | Silver (Rs/ kg) | Silver OI (In kgs)* |
| 24-Aug | Day | 63591 | 574710 |
| 24-Aug | Evening | 59836 | 560190 |
| 25-Aug | Day | 59375 | 562800 |
| 25-Aug | Evening | 61,951 | 524,880 |
| 26-Aug | Day | 62,457 | 547,290 |
| 26-Aug | Evening | 62,133 | 524,940 |
| 27-Aug | Day | 63,514 | 517,680 |
| MCX Gold Futures data for near month future | |||
| Date | Session | Gold (Rs/10 gm) | Gold OI (In kgs)* |
| 24-Aug | Day | 27,524 | 16,091 |
| 24-Aug | Evening | 26,293 | 14,989 |
| 25-Aug | Day | 25,678 | 14,844 |
| 25-Aug | Evening | 26,376 | 14,987 |
| 26-Aug | Day | 26,823 | 14,587 |
| 26-Aug | Evening | 26,899 | 14,130 |
| 27-Aug | Day | 27,638 | 14,675 |
| * Open interest is combined for all the expiry Compiled by BS Research Bureau Source: Bloomberg | |||
The volatility, traders said shows that gold is not a risk-free commodity. The quick fall and recovery had caught traders on domestic bourses unawares. On Wednesday night and Thursday, Indian traders had to liquidate long positions as prices were falling sharply and were to pay for mark to market margins.
Some liquidation was said to be forcible as stop losses were triggered. When prices were falling traders built fresh short positions which they had to cut as prices increased sharply the day after. “Many traders lost on both side of the price movements and their over all positions, open interests have come down,” said Ajay Kedia, director, Kedia commodities.
For gold, open interests are down nearly 10 per cent in the last four days, although it went up on Saturday by nearly four per cent indicating that the traders have turned bullish again. In silver, however, open interest has been consistently falling over the past few days. Jayant Manglik, president, Religare Commodities, said: “Basic fundamentals have not changed and hence gold looks bullish. Investors should buy gold on every dip.”
Rupee’s weakness has also made the precious metals costlier as India is a price taker in these commodities and relative strength of the US dollar could keep the rupee at lower levels in the coming weeks. Weaker rupee increases the cost of imports and hence prices quoted are higher.