Indian market increases option bets, gold expected to continue shining.

The world's largest jewelry market is increasing its bets on gold. With gold prices hitting record highs this year, Indian jewelry traders and retail merchants are turning to gold futures and options, both for speculation and to hedge physical positions. Sugandha Sachdeva, founder of financial research firm SS WealthStreet, said that this kind of betting is cheaper than futures, and with the recent surge in gold prices, this kind of betting has gained new appeal. The increase in investor interest is evident at the Multi Commodity Exchange of India (MCX): The daily average trading volume for gold futures and options in February soared to 605 billion rupees (about 7 billion US dollars), accounting for 26% of the total options trading volume at the exchange, the largest proportion since October 2021. While crude oil contract options still lead trading, their share has dropped from over 70% last year to 52%. Last week, concerns over US President Trump's tariff policies caused oil prices to drop to a six-month low, prompting investors to turn to assets considered safer, such as gold. Since Trump took office in January, the price of gold has risen by over 7%. Gnanasekar Thiagarajan, head of the commodity research company Commtrendz Research, said that while options trading will continue to evolve, market professionals are generally bullish on gold; "Trump is using tariffs for negotiations. All of this uncertainty benefits gold." In India, where demand for this precious metal is strong, gold is not only seen as a symbol of preservation and wealth, but also as a sacred asset with auspicious significance. While gold jewelry prices in almost all countries fell last year, gold jewelry prices in India only dropped by 2%, as India reduced import duties in July, stimulating demand and re-establishing itself as the world's largest jewelry market. MCX data shows that as gold prices hit record levels in February, the trading volume of gold futures and options in that month was almost three times the average level of 2024. Meanwhile, the daily average trading volume of oil futures and options fell to 1.2 trillion rupees, the lowest level since June. According to data from the Chicago Mercantile Exchange Group, last month's US gold options trading volume nearly doubled that of February 2024. Rahul Kalantri, vice president of commodities at Mehta Equities Ltd., said, "Traders are pulling out of oil options because they have found better opportunities in gold." Whether this trend will continue remains to be seen - last week saw a rebound in trading volume for oil futures and options, while trading volume for gold futures and options fell. But Thiagarajan said that given the current concerns about the pace of India's economic growth and stock market trends, gold will continue to be investors' favorite. He said, "Interest in gold and oil is generally opposite. What benefits the economy benefits oil. When it is detrimental to the economy or when there is uncertainty, people flock to gold."