Gold prices recoup partial losses; ETF prices recover up to 7%, silver prices trade 9% lower

The gold and silver prices have opened sharply lower on Sunday morning, tracking the carnage in global prices on Friday. The MCX gold and silver prices have plunged over 10% on Sunday morning. The gold futures recouped the majority of the losses and jumped over 5% from the intraday low levels. The MCX gold contract for March traded ₹1,40,000 up from ₹1,36,650 low levels on Sunday. While silver futures prices fell 9% to trade at ₹2,65,652 per 10 grams. Here is how gold and silver ETFs are trading on Sunday morning.

Most of the gold and silver ETFs have hit their lower circuit, as the majority of the ETF units in sell order wont be executed as prices have fallen into lower circuits. The circuit limits for NAVs are 20% for silver ETFs and 12% gold ETFs.

Gold and silver prices in the global markets witnessed the sharpest fall in a decade as the global gold price fell 8.8% and silver prices plunged 26.2% on Friday after major commodity exchanges in London and New York increased their margin requirements, which prompted for unwinding of major positions in the global exchanges, consequently impacting the prices.

CME transitioned itself into percentage based margin system, meaning that the margin requirements will increase and decrease according to the price volatility in the underlying security. Consequently, the cash margin requirement was revised upwards for gold, silver and platinum contracts. The gold cash margin requirement went up from 6% earlier to 8% from February 2. Similarly, the silver cash margin requirement increased from 11% earlier to 15% from February 2.

In addition, the appointment of Kevin Warsh as the new Federal Reserve governor also arrested the fall in the US dollar. Market experts suggest the new governor to be more hawkish and intends to focus more on reducing the Federal Reserve’s balance sheet size. This comes in sharp contrast to the broader market expectations of the President reducing the independence of the Federal Reserve by the President.