Multi Commodity Exchange of India Ltd. raised the margins on both gold and silver contracts by 1% and 1.5%, respectively, to manage risks. Global silver prices have been highly volatile recently, with shortages reported in physical markets. The problem has spilt over into domestic markets.
MCX provides trading in 30-kilogram and 5 kg silver futures and options contracts, as well as 1 kg silver futures contracts.
"In the current context, there has been backwardation between futures and spot prices in global derivatives exchanges and spot markets. Silver’s global futures and domestic MCX futures prices are aligned (accounting for currency conversion, customs duty, local dynamics, etc.)," a statement said.
"Since silver is a globally traded commodity, its price backwardation is being reflected in India, and on MCX, also due to the spike in demand for silver, driven by investment, industrial and festive demand," it said.
The near-month 30 kg silver contracts are due to expire on Dec. 5, whereas the 5 kg and 1 kg contracts are due to expire on Nov. 28. The outstanding positions in these derivative contracts will settle by way of physical deliveries at the time of expiry.
Moreover, for options contracts, only in-the-money contracts will devolve into the underlying futures contracts at option expiry, MCX said.
The bourse and its clearing house further said they are monitoring these derivative contracts and will take necessary steps to ensure stability and adequate risk management.
Silver Hits All-Time High
Silver prices hit an all-time high of $52.50 per ounce, as a short squeeze in London added momentum the rally, according to Bloomberg News. The record run of these metals have been fueled by the surging demand for safe-haven assets. Gold also climbed to another record high, adding on the eighth weel of straight gains.
Concerns about a lack of liquidity in London have sparked a worldwide hunt for silver, with benchmark prices soaring to near-unprecedented levels over New York. That’s prompting some traders to book cargo slots on transatlantic flights for silver bars, an expensive mode of transport typically reserved for gold, to profit off higher prices in London.
A jump in demand from India in recent weeks has drawn down the supply of available bars to trade in London. This comes after concerns that the metal could be hit with US tariffs had floated.
"The shortage in the physical market as Silver ETF demand increased and AMCs are buying silver against the units they offered and need to store in their vault. Demand for physical jewellry and products are is also there due to festival season," according to Anuj Gupta, director of YA Wealth Global.
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