With the US Federal Reserve deciding to taper its $85 billion a month stimulus programme from next month, gold prices are set to come under pressure, at least in the short-term.
Prices on domestic spot and futures markets will head lower on Thursday, though the dollar’s rise could cushion the fall.
As the US Fed Reserve official wound up their two-meeting overnight, Fed Chairman Ben Bernanke announced that the stimulus programme will be now be pruned to $75 billion a month from January.
The winding up was being done “reflecting cumulative progress and an improved outlook for the job market,” Bernanke said.
The Fed will now divide its purchases allocating $40 billion for Treasuries and $35 billion for mortgage bonds.
With the dollar gaining two per cent, bullion prices have straight away come under pressure. In the Indian context, this could weaken the rupee that could, in turn, make imports of gold, crude oil and vegetable oils costlier.
Spot gold, gold futures
In early Asian trade, spot gold pared its losses and ruled at $1,221.45 an ounce and gold futures maturing for delivery in February at $1,220.70.
NCDEX spot gold closed at Rs 29,800 for 10 gm on Wednesday.
On MCX and NCDEX, gold February futures are likely to drop below Rs 28,500 and could even breach Rs 28,250.
US crude stockpiles
Crude oil is likely to rule firm on the US Fed signals of growth despite tapering causing some concerns.
Brent crude for delivery in February slipped to $109.37 a barrel and US crude at $97.66.
Easing of concerns over weather, particularly in South America, and winter curbing demand for palmolein could drag the oils and oilseeds market. Besides, peak crushing season in India is another dampening factor.
Soyabean, crude palm oil
Chicago Board of Trade soyabean contracts maturing for delivery in March ruled at $13.17 a bushel. Crude palm oil March contracts opened up at 2,562 ringgit or $786 a tonne.
Corn, wheat prices
Fears over Chinese cancelling cargoes are dragging corn (industrial maize) prices, while projections of higher crop in Canada and Australia are putting pressure on wheat.
CBOT wheat contracts maturing for delivery in March quoted at $6.15 a bushel and corn for the same month at $4.25 a bushel.