Copper and Silver prices on MCX moving lesser than international spot price

Commodities
1

Recently I noticed copper international spot price moved up 6% between 14th and 15th May. However, Copper future in MCX didn’t move more than 2%. Similar thing happened with silver with India price moving much lower than international spot price. What’s happening here?

My understanding is futures in India are based on international spot price and with exchange rate mostly unchanged, this shouldn’t happen.

2

There can be many factors in pricing the contracts.
As an example, I will explain for copper contract.

  1. At the time of the launch of the MCX copper contract. They will refer to international LME copper contracts and introduce a theoretical price adding with cost of carry.
  2. In the secondary market most contribution to the price is based on demand and supply at the local market and geo-political news minorly affects the price.

Regarding your observation, if you’re referring to copper prices on investing.com showing around $5 per pound for the July contract, it’s important to note that MCX trades copper in kilograms and expiry date would change.

Here’s the conversion: 1 kg equals 2.20462 pounds, and with an exchange rate of approximately 83.5 INR per USD, the price might appear higher when compared with the MCX copper contract. The difference in the observed prices may also be due to the fact that you’re comparing the July expiry contract on investing.com with the May expiry contract on MCX.

Therefore, even though international spot prices influence futures, the actual pricing can vary due to contract expiry dates, local market conditions, and other factors such as demand and supply dynamics.

3 Likes