MCX NSE removes extra margin from gold and silver futures, trading will be cheaper
New Delhi Multi Commodity Exchange of India (MCX) and National Stock Exchange (NSE) have withdrawn the additional margin imposed on gold and silver futures. The decision will come into effect from Thursday, February 19. This decision has been taken as a removal of strict measures imposed after the sharp and unusual fluctuations in precious metals at the beginning of the month.
According to MCX, the 3% additional margin imposed on gold futures contracts (all variants) and 7% additional margin imposed on silver futures (all variants) will be removed from Thursday.
At the same time, NSE also clarified that the additional margin of 3% (gold) and 7% (silver) imposed under the circular issued on February 4 will end with effect from February 19.
In fact, at the beginning of the month, Multi Commodity Exchange Clearing Corporation Limited (MCXCCL) had imposed additional margin of 4.5% on silver and 1% on gold from February 5, while tightening the risk management.
After this, the margin was further increased from February 6, in which additional margin of 2.5% on silver and 2% on gold was added. Now that there has been a sharp correction in precious metals, the exchanges have given relief to the market by removing excess margins. This will reduce trading costs and business can pick up again.
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What will be the effect of removing margin?
1. Trading will be cheaper: Now traders and investors will have to deposit less money as margin than before. This means that more positions can be taken in the same capital.
2. Volume may increase: Trading activity in the market is likely to increase due to reduced margins. Especially the participation of small and retail investors may increase.
3. Volatility may increase: Lower margins mean higher leverage. In such a situation, price fluctuations may increase.
So will gold and silver be cheaper or more expensive?
Margin removal does not directly determine prices, but generally when margins are reduced, buying in the market may increase. If demand increases, there may be a rise in the prices of gold and silver.
However, the real direction will depend on the international market, dollar index and interest rates. Overall, this decision is a relief for traders, because now trading in gold and silver will be cheaper than before.
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