Commodity Derivatives

Betting on gold -silver ratio proves costly for local traders

The seemingly ever-rising gold -silver ratio is said to be giving sleepless nights to traders who shorted gold futures and purchased silver futures on domestic commodity derivatives bourses in February when the ratio was around 84 . They expected silver would outperform gold and the ratio would revert to its 200-week moving average of 78.11. Much to their chagrin, the ratio spurted to a 26 year high of 87.6 in April and currently quotes at an even higher 90.6 based on weekend Comex prices of gold and silver, hurting them with huge unrealised losses.

Gnanasekar Thiagarajan, director of Commtrendz, and Nitin Kedia,business head of Kedia Commodity, claimed they’d heard of traders rolling over positions since February hoping to square off their trade at a profit. But with gold outperforming silver on hopes of lower interest rates in the US, yield inversion in that country and international safe haven buying amid USChina trade tensions, these traders have been jinxed.

Now, they are keenly focused on the month end G-20 summit in Osaka, Japan, where US President Trump and his Chinese counterpart Xi are expected to meet for resolving the trade spat. The slowing base metals complex, of which silver is a part, in addition to being a precious metal, has taken a toll on silver. The gold and silver contracts on domestic commodity bourses take price cues from international exchange Comex.

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