MCX expands daily price band for bullion

Silver witnesses wild fluctuation

Trading in precious metal futures is expected to expand and deepen considerably as a result of the widening of the daily price band to 22.5 per cent from 9 per cent.

With the commodities market regulator Forward Markets Commission (FMC) expanding the band today, traders are bracing up for a sharp increase in trading volumes.

The trade in silver was not disrupted today despite 17.5 per cent drop in prices compared with yesterday, as well as sharp fluctuation in its prices between the high of Rs 19,220 a kg and the low of Rs 17,055 a kg.

"We observed that the daily trade limits should be revised upwards to a manageable level for international commodities such as gold and silver.

As these commodities (such as precious metals) have a wider scope for fluctuation, the change in daily trade limit is logical," FMC Director Anupam Mishra said.

On Thursday, silver May futures on MCX broke trade circuit limits at 6 per cent, 9 per cent, 12 per cent and 15 per cent following which the exchange had levied a special margin of 3 per cent, with effect from 1700 IST.

The MCX silver (May 2006) recorded a turnover of Rs 22,422.72 crore, while the MCX gold (June 2006) posted a turnover of Rs 21,515.97 crore in the week ending Friday. The outstanding position for the MCX silver (May 2006) for the week was 4,00,540 kg, while the outstanding open interest for MCX gold (June 2006) was 10,806 kg.

Despite being bullish on silver in the long term, market players, however, are clueless about the situation today. "The situation is quite risky. It is difficult to predict which way silver will move.

Last evening, overseas trade saw a correction and early trade in domestic spot reacted to it. The market, however, saw a price rise today," said T Gnansekar, an independent bullion analyst.

Silver prices are expected to remain strong ahead of the launch of a new investment vehicle in the US, firm copper, gold and crude oil prices and a weak US currency.