Is it an effect of Friday the 13th? Gold plunged over one per cent in Singapore in early morning trade as the dollar dived to a week-low against the euro and other Asian currencies. The South Korean won hit a 15-month high.
The dollar slipped against a basket of currencies after the US Fed Reserve said it would buy bonds from the market. This move will weaken the greenback. A slipping dollar will strengthen the Indian rupee.
This, in turn, will make commodities, including gold that the country imports to meet its demand cheaper.
The market overlooked the factor that a near-zero level interest rate announced by the US that will help investments in gold.
In Singapore by 7 am IST, spot gold dropped below the psychological level of $ 1,700 an ounce to $ 1,698.82. Gold February contracts declined to $ 1,700.30.
In the domestic market on Wednesday, gold for jewellery (99.5 purity) firmed up to Rs 31,115 for 10 gm, while pure gold (99.9 purity) was up at Rs 31,240.
The South Korean won hit a 15-month high for the third straight day and most emerging Asian currencies held firm on Wednesday, supported by expectations for more US monetary stimulus.
The oils and oilseeds counter could see bears holding on to their position in view of the currency movements. The likely fall could be capped by hopes that the US export data expected tonight could be a market-moving factor.
Soyabean March contracts on the Chicago Board of Trade (CBOT) ended marginally higher at $14.73 a bushel overnight.
Crude palm oil February contracts, on the other hand, crashed to 2,248 ringgit ($ 737) a tonne.
The grains complex could also come under pressure with corn and wheat futures slipping on CBOT on lower exports.
Corn for delivery in March settled lower at $7.25 a bushe, while wheat for delivery the same month dropped to $8.12 per bushel.
The US Fed move, however, buoyed crude oil. This will act as a boost for natural rubber since its alternative synthetic rubber, derived from crude oil, will gain.
Brent crude futures rose to $109.50 a barrel, while NYMEX crude closed at $86.77.