Surging gold, silver push up commodity futures turnover

Soaring prices of precious metals helped increase the turnover on commodity futures exchanges in the country 53.89 per cent in 2010-11 fiscal.

According to the Forward Markets Commission data, the value of trade during last fiscal increased to Rs 119.48 lakh crore from Rs 77.64 lakh crore the previous fiscal. The rise in turnover was mainly due to 74 per cent rise in the value of trade in bullion to Rs 54.93 lakh crore. The turnover in bullion made up 46 per cent of the total trade value in all commodity futures exchanges.

“The turnover increased because the value of gold and silver surged. The increase in their prices helped improve the exchanges' turnover,” said Mr Anand James, Chief Analysts, Geojit Comtrade Ltd.

In fact, trading in agri-commodities took a back seat last fiscal after its value nearly doubled during 2009-10. Turnover in agri-commodities increased 19.58 per cent to Rs 14.56 lakh crore from Rs 12.17 lakh crore a year ago.

The surge in 2009-10 could be attributed to the Centre reviving futures in wheat, rubber, potato, soya oil and chickpea. Futures in these commodities, barring wheat, were banned in 2008 to keep inflation on leash.

The Centre had banned futures in wheat, rice and pulses in February 2007 and sugar later that year to keep prices under check. Since then, the Government has lifted the ban on futures trading wheat (May 2009) and sugar (December 2010).

“There is a tendency to link the rise in turnover to increase in number of trades. But this may not be true when gold and silver prices sky-rocketed,” said Mr James. “It, however, does not mean that interest in these futures was slack,” he said.

Gold prices surged to Rs 20,775 for 10 gm in Mumbai on March 31 this year from Rs 16,380 on April 1, 2010 and Rs 15,095 on April 1, 2009.

Silver, during the period, increased to Rs 56,370 a kg from Rs 21,744 and Rs 20,775 respectively. On Saturday, gold (99.9 purity) closed at Rs 22,135 and silver at Rs 72,980.

On MCX, 3.05 crore gold contracts totalling 12,890 kg valued at Rs 42.64 lakh crore were traded last fiscal against 2.68 crore contracts totalling 12,112 kg valued at Rs 19.22 lakh crore the previous fiscal.

In the case of agricultural commodities, good monsoon and record production in the case of wheat, cotton and sugar kept participants away from trading.

“Though sugar futures resumed only recently, the record production led to lack of hedging,” said Mr James.

“The futures market is reflecting physical and retail markets. There is investor interest in these precious metals. That's why we are now seeing good response for e-gold and e-silver,” the Geojit Comtrade official said.

Higher prices in metals such as copper and aluminium saw turnover in base metals increase nearly 50 per cent to Rs 26.87 lakh crore. Energy was another counter that sparked last fiscal, witnessing a 46.5 per cent rise in turnover to Rs 23.10 lakh crore. This followed a 54 per cent rise in trade value last year.

Trading on other commodities that comprise guarseed, guar gum, castor etc dropped to Rs 29.04 crore from Rs 3,134 crore a year ago.

In the year ahead, interest in precious metal could soften if prices stabilise. Gold and silver prices could see some drop after Akshya Tritiya, say analysts.

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