NSE’s decision to hike margin requirement comes at a time when gold and silver prices have witnessed an unprecedented rally this calendar year.
Naturally, this has led to more volatility in gold prices and enhanced speculation. Gold and silver, being more of a safe-haven asset rather than risk assets, should ideally not incur such volatility.
The decision to increase margins, therefore, will lead to higher costs, which in turn, could cool down speculative buying and selling which contribute to these wild price swings.
It also ensures that traders, even if they still buy or sell contracts, can cover their losses thanks to enhanced normal margin requirements.
Ultimately, this move would lead to more stability within the future trading for gold and silver, which, in particular, has witnessed wild price swings in the last couple of months.
