The Multi Commodity Exchange of India (MCX) and the National Stock Exchange of India (NSE)  withdrew hefty additional margin requirements on gold and silver futures. The decision marks a pivot from the defensive crouch exchanges adopted earlier this month to curb excessive speculation.

India’s leading commodity exchanges move to lower the cost of trading precious metals, signaling that the recent bout of “blood and thunder” volatility in the bullion market may finally be cooling.

The rollback, effective Feb. 19, removes a 3% additional margin on gold contracts and a 7% surcharge on silver. For traders, the move is a welcome relief, effectively freeing up capital that had been locked away as collateral during a period of wild price swings.

A Wild Ride for Bullion

The extra margins were originally slapped on Feb. 4 as a circuit-breaker of sorts. At the start of the year, gold prices had surged nearly 35% in a frantic January rally, fueled by a cocktail of geopolitical jitters and institutional inflows.

However, the “everything-up” trade eventually hit a wall. Prices have since cooled by roughly 15%, allowing regulators to breathe a sigh of relief.

“The exchanges are essentially saying the fever has broken,” said one Mumbai-based commodities analyst. “By lowering the barrier to entry, they are inviting liquidity back into the pits, which had thinned out as trading costs spiked.”

The Margin Game

Margin requirements are the primary tool exchanges use to ensure traders can cover potential losses. When volatility spikes, exchanges hike these requirements to prevent a domino effect of defaults.

• Gold: Traders no longer face the 3% “volatility tax.”
• Silver: The more volatile sibling sees a significant 7% reduction in required upfront capital.
• Market Impact: The move is expected to boost participation from both hedgers—jewelers looking to lock in prices—and speculative day traders.

Global Echoes

The maneuvers in Mumbai mirror a broader global recalibration. Markets worldwide have been struggling to find a “new normal” for precious metals. Late last month, the CME Group took similar action on Comex gold and silver futures following one of the steepest price declines in decades.

The stabilization in India is particularly crucial as the country remains one of the world’s largest consumers of physical gold. While the domestic market appears to be finding its footing, analysts warn that macroeconomic shifts—particularly regarding emerging market ETF inflows—could still trigger fresh turbulence.