Gold may Struggle to Breach $1,300 an Ounce, For Now
The slowdown in global economy is hitting the export of gems and jewellery, which accounted for around 15% of India’s total merchandise exports in 2015-16 Jewellery Exports Down 3.5% in 2015-16
Mumbai: Gold could possibly test .₹ 30,750 per10 gm over a month –– the near month local futures contract traded at .₹ 29,516 (exVAT) intraday on Thursday –– but is unlikely to break that level convincingly, options data for June on US-based Comex shows, providing some solace to those who need to buy for a wedding or other occasional demand.
That’s because traders have sold maximum call options on gold at $1,300 an ounce, corresponding roughly to .₹ 30,750 at the relevant currency rate. Traders’ outstanding positions or open interest at $1,300 strike was 7,697 contracts.
Those who sell call options face huge risk if that option rises above the strike level sold plus premium paid. In that case, those who’ve bought the options rake it in. But, in the options universe the sellers are normally the stronger hands. The $1,300 call traded at $9.4 intraday on Thursday, significantly below its average life price of $19.32. That simply means sellers have been at an advantage as they’ve pocketed a large part of the premium (option price) paid by buyers who’ve been accumulating the $1,300 call, expiring 26 days from now. Sellers will defend the $1,300 tag in case prices rise further from current levels ($1,250s), which makes a vault above $1,300 difficult. The maximum outstanding positions on puts show $1,200 to be a major support over the next month. OI of the strike is at 5,739 contracts, while its price hit a life low of $3.7 intraday on Thursday. Sellers of puts have pocketed huge money from buyers who on an average paid $87.57 for the option over its life to date.
Basis the options, the price range in rupees works out to roughly .₹ 28,389-30,750 per 10 gm. ted for 14.78% of India’s total merchandise exports in 201516. “For the first time ever, the export of cut and polished diamond showed decline of 13.66% in FY16 in comparison to FY15,” GJEPC chairman Praveen Shankar Pandya said. “Slow demand led to the fall in rough diamond imports by 16.17% in FY16 for the first time,” he said. India imported rough diamonds worth $14.04 billion during the fiscal, down from $16.75 billion the previous year. Exports to the US went up 1% and to UAE 3%. Pandya said weak international market, high rough diamond prices and absence of profitability were the major challenges faced by the industry. He said diamonds or diamond jewellery do not command top of the mind recall among consumers globally.