Gold prices in the domestic spot and futures market are likely to come under pressure with the equities market rally luring away investors from the bullion market.
Dow Jones Industrial Average and S&P’s 500 Index touched key landmarks on Monday night, providing investors enough fuel to bet on the stock market.
Views that sooner or later the US Federal Reserve will have to wind up or cut its $85-million-a-month stimulus programme are not helping precious metals’ cause either.
Though investors in equities market began to book profits towards market closing on Monday, stocks continued their rally in Asia on Tuesday.
To top all these, money managers and hedge funds have raised their bearish bets on gold, while gold exchange-traded funds are seeing investors cashing out.
Gold holdings in SPDR Trust
On Monday, gold holdings in SPDR Trust, the world’s biggest exchange-traded fund, dropped to 864.51 tonnes.
Even as different voices are being heard on the US stimulus programme, Federal Reserve Bank of Philadelphia President Charles Plosser has called for finalising a size for the stimulus before plans are in place to cut it.
Robust demand in China and to some extent in India could provide support to the yellow metal. Gold may get a more clear direction after the minutes of the US Fed October 29-30 meeting are released tomorrow.
Spot gold, gold futures
In early Asian trade, spot gold dropped to $1,273.63 an ounce and gold contracts maturing for delivery in December to $1,272.90.
In the domestic market on Monday, gold for jewellery (99.5 per cent purity) dipped to Rs 31,065 for 10 gm and pure gold (99.9 per cent purity) to Rs 31,215.
On MCX and NCDEX, gold December futures could head lower towards Rs 30,000.
Crude oil
Saudi Arabia’s over-supply and fears of US tapering its stimulus programme are likely to keep crude oil cool. Brent crude for delivery in January slipped to $108.11 a barrel and US crude to $92.94.
Demand for soyameal
The oils and oilseeds market is likely to come under pressure though it is likely to find support from demand for oilmeals, particularly soyameal.
Demand for soyameal and soyabean exports in the US are keeping the counter firm. However, the US Environmental Protection Agency’s move to revise the biofuel mandate is likely to drag soya oil.
On Chicago Board of Trade, soyabean January contracts were up at $12.89 a bushel. On Bursa Malaysia Derivatives Exchange, crude palm oil contracts for delivery in January opened lower at 2,582 ringgit or $810 a tonne.
Move to cut bio-fuel mandate
Wheat and corn (industrial maize) are sure to head south with the US EPA move to cut bio-fuel mandate. Corn is the one that is likely to suffer the worst, while it is likely to have some impact on wheat too.
Wheat, on the other hand, is under pressure after export tenders floated by Indian State agencies received bids higher than the $260 a tonne floor price set by the Government.
Corn for delivery in March quoted lower at $4.20 a bushel and wheat contracts for the same month ruled at $6.53 a bushel.