Gold Futures drive India’s commodity market

January 31, 2009

Commodity Online
MUMBAI: As global gold prices soared to record levels this week, the yellow metal continued to shine in India’s commodity futures market with a different record: gold contracts are the hottest commodities traded in the Indian market.

Gold futures prices in India’s commodity exchanges zoomed on Friday as rupee got weak amidst volatile stock markets in the country. Gold futures February contract price at India’s largest Multi Commodity Exchange traded at a record high of Rupees 14448 for ten grams.

Analysts who have been following gold futures prices in the Indian markets said that the yellow metal could gatecrash through the Rupees 15,000 level next week. “Gold is the hottest commodity where the action is on in the Indian commodity market. Gold will continue to rise in the futures and spot markets in India because of weak rupee and meltdown sentiments from across the globe,” Pallav Sinha, a bullion analyst in Mumbai said.

Gold has become the largest traded commodity in India’s domestic futures market as a large number of traders are taking delivery of the yellow metals through the futures route.

Trading in bullion contracts contributed Rs 2,023,441 crore to the total turnover of India’s commodity exchanges during the first nine months of the current fiscal, according to a data from the commodity market regulator Forward Markets Commission (FMC).
Trading data from MCX show that traders took record delivery in gold contracts. Commodity market traders sought delivery of 529 kg of the January gold mini contracts at MCX.

The gold contracts delivery from MCX during December was just 49.6kg. A large volume of delivery in silver has also been reported at MCX.

Mumbai-based bullion dealer Paras Shah says gold and silver are the two most actively traded commodities in the Indian commodity market. “India is the largest market place for gold and diamond. So it is natural that in the futures market also, gold continues to drive the Indian commodity futures market,” Shah told Commodity Online.

Hedge says the bullion industry in particular and futures market in India would greatly benefit if traders take delivery of commodities like gold and silver.

On the MCX, there has been demand for different variants of gold contracts. MCX has seven variants of gold and eight variants of silver futures contact. “India has a bright future in futures market if important and hot global commodities like gold and silver are up for delivery by traders and investors,” added Shah.

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