Ahmedabad accounts for over 70 per cent of total domestic bullion trade. Hence, the ripple effects of this `bullion city' could not be ruled out in the other major bullion markets, say local traders.

It's a no-win situation for the small time bullion traders, for, it has come to such a level in the current lean season that it is difficult to sell even 1,000 biscuits a day. In silver, the situation has become even worse, as abnormal price volatility in global markets has resulted in lower imports. This has created a liquidity crisis, leading to plummeting of volumes to just one/two tonnes a day from an average daily volume of over five-seventonnes earlier.

Increasing speculative activity by some traders too has added woos to the bullion trade. Further, in silver, some traders have even resorted to illegal forward trade, sources said.

Forward positions in silver can be taken by giving margin money to a dealer, who will keep it as a deposit on which no interests is paid. After this, one can buy or sell silver without taking or giving actual delivery. Outstanding positions are settled in on the basis of prevailing price difference.

Another cause of concern is the recent default by some rouge bullion dealers. A local trader, who was earlier working as clerk in a private a firm of Angadia, has recently plunged in the bullion trade to take advantage of the rampant speculation in silver.

Hoping to make a fast buck, he took large positions in silver, which finally ended in a loss. Unable to pay his dues, he is now missing after closing his shop. His loses are believed to be in the range of Rs 3.5 crore.

In another instance, one small-timetrader took large long position on silver at roughly $6.00 per ounce. His importer lured him to buy more silver to reduce the effective purchase cost.

But instead of improvement in prices, the global prices dropped to $5.20 per ounce within a few weeks.

They are said to have lost around Rs 9 crore. In anticipation of criminal complaints that could be lodged against him, the trader has sought legal protection. Till date debtors are waiting for their dues.

If such modus operandy is allowed to continue for long, then it is difficult for traders to survive in the trade, bullion importers say.

The bullion importers are also worried about the overall condition of the markets. They are fearing of supply overhang in gold, which prompts selling at higher level. In anticipation of upward revision on import duty, local importers have cleared their consignments hurriedly to take benefit of proposed duty structure, forecast proved correct, but due to fall in global prices they suffered losses. Fear of supplyoverhang looms large over the market. Since last month, there has been disparity in prices of both precious metals. If this trend continues there is every chance of more defaults, and that will create contagion effect.

"At this juncture, it is difficult to decide your trading partner. If you hoard your goods, you have to bear interest cost and speculative gain and loss only. while delivering such a valuable goods on an advance cheque (which has no surety to be honoured) you are running the risk of loosing your goose," a trader said.

Highly volatile global markets, lack of hedging facility and slump in the demand are major reasons for bad shape of business. As economy is opening up, local markets become less insulted from global events. International bullion prices and domestic exchange rate go hand in hand with domestic bullion prices. Due to lack of hedging facility like futures, traders are reluctant to take substantial positions, Ahmadabad Choksi Mahajan president Girish Choksy said.