Traders cut positions on MCX due to policy uncertainty

Volume increases due to price volatility, traders churn portfolios

Open interest in non-farm commodities on the Multi Commodity Exchange (MCX) has declined sharply in the last three weeks following uncertainty over global economic indicators. Traders have started squaring off their positions and churning their portfolios for better profit. This is happening despite the rising prices of base metals and falling bullion prices.

The open interest for all gold contracts declined to 8,160 lots on Wednesday from 9,267 lots on November 8. Open interest for all silver contracts fell to 15,389 lots on Wednesday from 16,163 lots on November 8. “More than global factors, demonetisation affected trading sentiment. Those with cash balances are busy adjusting them and those who do not have cash are abstaining from fresh positions,” said Navneet Damani, assistant vice-president, Motilal Oswal Commodities.

The trading volume, however, has increased in non-farm commodities due to the high price volatility.

Analysts said US president-elect Donald Trump’s proposed $1 trillion infrastructure spending was supporting base metals. Copper has jumped 10.31% to $5,564 a tonne, zinc 5.26% to $2,572 a tonne, and lead and aluminium 4.92% and 3.49% to $2,175 a tonne and $1765.5 a tonne, respectively.

“Base metals have gained a quarter since Trump’s victory. Many traders are churning their portfolios for better profitability,” said Ajay Kedia, managing director, Kedia Commodity.

Gold and silver declined amid expectations of a hike in US interest rates. Gold declined 6.85% to $11,88.21 an oz and silver 10.92% to $16.37 an oz. 
 

The correction in bullion prices was relatively less in rupee terms due to a 2.83% rupee depreciation. Standard gold traded on Thursday at Rs28,980 per 10 gm in Zaveri Bazaar and silver fell to close at Rs41,340 a kg.