May 2006 - Market activity report

The Exchange continued to accomplish newer milestones during the month. First, precious metals prices witnessed extreme high levels of activity with gold and silver prices reaching record levels not seen in the last 25 years. Second, the value of gold futures traded on the exchange since its inception crossed the $3 billion mark during the month. Third, a highest-ever weekly traded volume of 20,466 contracts was recorded during the second week of the month. Finally, the total number of contracts traded in a day registered a new high of 6062 on May 15, 2006.

A total of 79,660 contracts of gold and silver futures were traded during May 2006 as against 64,444 contracts in April 2006, an increase of around 24%. The traded volume in gold futures segment stood at 62,139 during the month whereas silver accounted for 17,521 traded contracts.

Gold futures valued at $1.34 billion were traded in May 2006 as compared to$ 0.798 billion in April 2006. It was the highest monthly volumes in terms of the number of contracts traded as well as in value terms since inception of the exchange. The total value of gold futures traded on DGCX since inception (November 22, 2005) now stands at $3.40 billion (173,039 kilograms of gold futures contracts).

Total open interest in respect of gold futures i.e. the number of contracts executed (bought or sold) but not closed out by the participants, as on May 31, 2006 stood at 772 contracts valued at $16.04 million. The open interest in the June delivery contract stood at a new high of 1408 on May 19. In respect of silver futures, the open interest at the month-end was 433 valued at $5.47 million.

Gold futures prices for June series recorded a new 25-year high on May 12, 2006 closing at $732/ troy oz. while silver futures rose to a record high of $15.08 on May 11. The table given below shows the price movement of the near-term gold and silver futures during the month of May 2006.

A higher average intra day volatility of $19.27 was observed during the month in the gold prices in June maturity contract as compared to $12.76 during April 2006. The average daily volatility in respect of Silver July 2006 expiry contract was over 64 cents.

During the month, precious metal prices witnessed sharp bouts of volatility - silver prices recorded a single-day fall of $1.03/ troy oz on May 15 followed by a sharp rise of 73.5 cents/ troy oz on May 23. Similarly, gold prices also registered their highest-ever single day fall of $33.40/ troy oz on May 24. DGCX effectively handled the daily settlement of trades on these days thereby exhibiting an efficient system of risk management.

Considering the steep rise in prices and the high degree of intra-day volatility in gold and silver, DGCX raised the initial margin levels for both the commodities contracts. The initial margin on Gold futures was raised from $650 to $850 per contract. For Silver contracts it was hiked from $750 to $1000 per contract. The change in margin was brought in to effect from 19 May 2006. Besides, the delivery margins have also gone up from $3250 to $4250 for gold futures and from $3750 to $5000 for silver contracts respectively.