Gold breaches all time high over Iran tensions

Gold breaches the 42k INR mark over recent  Iran tensions

The price of gold in the Indian market jumped past the 41,000 INR mark, nearing almost 42,000 INR per 10 grams of the precious metal. The jump was observed during morning trade in international markets.The peak price that was observed in the Indian market was marked at 42,300 INR per 10 grams whereas the global spot market observed a peak of 1,595$ per oz.

The jumps in the prices in the international market has been directly linked to the recent skirmishes and growing tensions between the USA and Ira, with Iran recently launching a missile strike against a US base on Iraq soil in retaliation of having their general killed by a US drone strike. The multi Commodity Exchange (MCX) opened the price of gold at 40,946 INR per 10 gm which soon rose to 41,293 INR by noon. The price settled at 40,933 INR in the morning session due to profit booking.

Mumbai spot gold closed at more that 312 INR higher than 40,687 INR while the London spot market which had risen to 1611$ an oz early Wednesday, had fallen to 1577$ by afternoon. Silver in the MCX closed on Wednesday with a marginal gain while crude oil slipped by 0.2 percent, following a global move.

This high elasticity being experienced by bullion prices has prompted brokers to reduce leverage for clients.According to sources, the brokers were said to have reduced this for most clients to twice the intra day trading limit, as compared to the five times earlier. This was done to prevent the clients from defaulting, as seen in the past. This reduction in intra day leverage may be seen to affect trading volumes on exchanges that deal with precious metals and energy with a special emphasis on the prices of bullion. 

A senior official with a leading commodity brokerage has commented on the situation by saying that the reason why several brokerages have taken selective calls to reduction in intra day leverage is to manage risks in case of high volatility. The move was also in line with the recent SEBI circular which asked brokerages to give leverage to their clients based on the margins of respective exchanges and brokers.

Gnanasekar Thiagarajan, Director of Commtrendz, commented on the topic, adding that while bullion was getting support on safe haven buying, crude oil prices have not changed much, which was probably due to the lesser impact on oil as compared to gold. Iran's attack on the oil fields, probably had a less impact as compared to Iran's attack on the US bases, leading to the current situation. Hence, a correction in gold prices cannot be ruled out after the ongoing instability in the West Asia cases.