Nix Au on MCX?

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Mother's Day 2008 might be a trying time for the gentleman.

Well, at least one jewelry trade group wants to do something about this situation. India's The Hindu reports this morning that:

"Apex body of the bullion and jewellery traders All India Sarafa Association on Wednesday appealed to the government to ban futures trading in gold and silver on the Multi Commodity Exchange. The association, at its annual general meeting, unanimously passed a resolution asking the government that in the interest of the traders and consumers gold and silver trading should be banned on the MCX.

The association's President Sheel Chand Jain submitted a memorandum to the Prime Minister Manmohan Singh and Finance Minister P Chidambaram to take initiatives to stop futures trading in precious metals. In the last one year from April 2007-2008 prices of gold surged by about 45 per cent from around Rs 9,000 to the over 13,000 recently, while silver rose by around 35 per cent from about Rs 19,500 to over 26,500 per cent.

In view of a vast fluctuation in the gold and silver prices, which created both confusion and panic in the minds of consumers, the government should take an immediate step, Jain said. He said the futures trading ruined bullion trade as prices rose mostly on speculative base with hardly any physical buyer in the market.

"There is no reason for such volatile fluctuations in the gold and silver prices where a large number of small traders indulging in the future trading throughout the country," Jain said. "

Not sure if the association will succeed with this call to arms. Most likely, not. However, it is well worth keeping in perspective the fact that India has been, and remains the largest gold consumer globally and that its jewelry industry is an essential part of the economic fabric of the country, in the same way that gold has been an essential part of Indian life and culture for centuries. To put it into further context, the 72 tonnes of gold that the ETF vehicle amassed during the first quarter of the year would be about what India should have imported in just the month of January, had there been some value perceived in a $900+ gold price. About five tonnes were actually brought into the country.

Maybe the trade in India can find short-term solace (but not much of it) in the newly issued UBS gold forecast as brought to us by Bloomberg:

"UBS AG cut its short-term forecasts for gold on expectations that the worst of the credit crisis is over and that further dollar declines will be limited. The bank, Switzerland's biggest, expects gold to trade at $900 an ounce in one month, lower than the $950 forecast on March 25, London-based analyst John Reade wrote in an e-mailed note today. The three-month forecast was lowered to $850 from $1,000 previously."

On a final note, if you are interested in silver (and who isn't these days?) and want to get the real picture of what is going on in that market, do yourself a favor and make a small investment into the CPM Group's 2008 Silver Yearbook, set to be released on the 29th of the month. Rather than trying to decide which particular silver pundit may be in possession of the correct set of facts regarding current market conditions, you now have the opportunity to go straight to the source that actually gathers and dissects data for a living and learn the hard numbers and actual trends in the metal. Kitco is a proud sponsor of this quality research and we believe you will benefit from delving into its contents. You will find the book available here: http://store.cpmgroup.com/