Gold falls 0.59 per cent to Rs 20,120.
The Multi Commodity Exchange (MCX), the country’s largest commodity derivatives platform, is closely monitoring volatility in precious metals to take a call on raising margins. Traders believe MCX may raise margins next week if last week’s high volatility continues on Monday.
Last Wednesday, MCX raised the silver margin from five per cent to nine per cent in tandem with the benchmark New York Mercantile Exchange (Nymex). Nymex’s action controlled speculative volatility immediately, with silver falling from $29.36 during intra-day trade to $26.34. It closed with a marginal gain at $29.93.
On MCX, the response was positive, with silver being traded in a narrow range of Rs 42,440-41,680 per kg.
Nymex, however, retained the margin in gold futures at five per cent due to less volatility. The dramatic fall of nearly $40 on Friday was more due to profit-booking than speculative activity. Hence, if the price recovers on Monday in the global market and the rupee weakens from the current level, MCX will have to revise the margin in gold also, according to a bullion trader.
In most global markets, traders get a margin call if commodities they have bought (with borrowed money) fall in value past a certain point. In this case, traders either have to deposit more money in the account or sell some assets.
In domestic exchanges, however, the margin is automatically calculated on the basis of the value-at-risk (the risk of loss on a specific portfolio due to price volatility)
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“Much would depend, though, on the precious metal’s behaviour in the New York session on Monday and the implication of the G20 meeting on global financial markets which will set the direction for the dollar,” said Ketan Shroff, owner of Pushpak Bullions, a Mumbai-based bullion trader.
Meanwhile, gold fell 0.59 per cent in Mumbai’s Zaveri Bazar due to lacklustre trade and closed at Rs 20,120 per 10 gram on Saturday from Rs 20,240 per 10 gram on Friday.
Traders believe precious metals will remain volatile due to the financial crisis in Ireland which signals that Europe is yet to recover from the economic crisis which started with Lehman Brothers’ debacle in September 2008.
The spot silver fell 1.64 per cent or Rs 675 on Saturday amid lacklustre trading in Mumbai’s Zaveri Bazar. Almost half of jewellery retailers observed holiday due to a dramatic fall in precious metal prices globally.
The white precious metal plunged to Rs 40,510 per kg on Saturday from Rs 41185 per kg on the previous day.