Bullion futures at 9-month low as global mkts slide
The Chinese stock selloff, which quickened the slide in global markets, has left local bullion futures market bearish after prices hit a 9-month high on Tuesday.
By Deepa Krishnan, TNN |
MUMBAI: The Chinese stock selloff, which quickened the slide in global markets, has left local bullion futures market bearish after prices hit a 9-month high on Tuesday.
The international market has been trading in a wide range of $30 over the past week. This has led to increased volatility in Indian bullion prices. The average volatility has been 3%, which is double the normal level. “The risk factors in the market have increased for traders as well as brokers,” said Krishna Nathani of India Bullion.
However, a sudden fall in Chinese stocks along with Iranian nuclear tensions and US mortgage worries could see a resurgent interest in safe-haven assets like gold, said market watchers. However, the yellow metal has declined sharply since Tuesday, and has no clear direction.
“The unwinding of yen carry trade from risky assets had put gold under pressure. A poor economic data from the US should support gold price,” said Si Kannan, AVP, Kotak Commodities.
The local market is, however, bearish. The April contract on MCX has been sliding since Monday from Rs 9,837 per 10 gram. The market closed at Rs 9,563 on Thursday and fell to another low of Rs 9,501 per 10 gram on Friday in intra-day trading. The open interest (OI) also indicates more sellers in the market.
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The OI declined from Monday’s 9,782 lots to 9,164 on Tuesday, indicating a huge sell-off in the market. The OI rose on Wednesday to 9,501 while the price fell, signalling a bearish market. Even as prices fell on Thursday, the OI was at 9,751 lots, indicating more selling. Sharp rallies and selloffs create disparities between international and local prices, thus creating good arbitrage opportunities for investors and traders. In the past two days, the gold contract on MCX was trading at a disparity of Rs 100 or more with the commex prices.
This often happens when there is a sharp selloff in the international market because local traders avoid selling near lows. Similarly, during rallies, they avoid buying at near highs.
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