India’s commodity markets regulator ordered exchanges to increase margins on gold futures after a record plunge in the nation’s currency fueled a rally in bullion priced in rupees to an all-time high.
Initial margins on all contracts will rise to five per cent of the value from September 2, from four per cent, the Forward Markets Commission said on website. An additional margin of five per cent will be levied on gold, silver, Brent crude, crude oil, and natural gas contracts due to high volatility in prices, it said.
Futures on the Multi Commodity Exchange of India in Mumbai advanced to a record this week, rebounding 33 per cent from a two-year low in June, threatening jewelry demand during the main festival season. Consumption in the country, which imports almost all the bullion it needs, accounted for about 20 per cent of global demand in 2012, according to data from the World Gold Council.
“When the market is moving so sharply, the regulator will have to take some measures,” said Madhavi Mehta, an analyst at Kotak Commodity Services in Mumbai.
“But for internationally traded commodities it is difficult to curb volatility. It is a derived volatility in the domestic market because of the movement in global markets and the rupee.”
The contract for delivery in October surged to a record of Rs35,074 ($529) per 10 grammes on the Multi Commodity Exchange on August 28 and was at Rs32,927 in midday Mumbai trading on Friday. Futures have gained 5.8 per cent this year, compared with a 17 percent drop in the metal priced in dollars.
India’s rupee is headed for its biggest monthly loss since 1992, the world’s worst currency performance, on concern a deepening economic slowdown will deter investors at a time when the US prepares to pare stimulus. The government raised import taxes on gold three times this year to 10 per cent to moderate consumption that has contributed to the slide in the rupee and a record current account deficit. Banks and traders have halted imports since the end of July after the central bank linked inbound shipments to re-exports.
