Gold prices in the domestic spot and futures market are in for a further hit with the global market slipping below $1,200 an ounce.
The yellow metal saw increased selling overnight, taking it to a three-year low of $1,188 before making its way up somewhat. The fall has been expected but the US Fed Reserve’s move to begin its tapering of the $85 billion a month stimulus programme from January itself seems to have caught the market by surprise. That explains prices of the yellow metal falling sharply on Thursday.
Investors, too, seem to be making a queue to exit the counter with holdings in gold exchange-traded funds dropping further. SPDR Trust, world’s biggest gold-exchange traded funds, reported that holdings had dropped to 808.72 tonnes.
Goldman Sachs Group has warned that gold’s decline has not been done yet and in all respect, the yellow metal could see its worst annual fall in 32 years.
In the Indian context, the only factor that can hold gold is the drop in the rupee against the dollar. A weak Indian currency makes imports of gold, crude oil and vegetable oils costlier. In the current scenario, the currency, at the most, can only provide a cushion and not any escape route. The off-season for wedding until January 15 is a dampening factor, though.
Buying in Asia, particularly China, may emerge at these prices but to what extent can that help the precious metal is to be seen.
Spot gold, gold futures
In early Asian trade, gold ruled at $1,294.44 an ounce and gold futures maturing for delivery in February at $1,293.50.
On NCDEX, spot gold dropped to Rs 29,400 for 10 gm on Thursday.
On MCX and NCDEX, gold contracts due for delivery n February could slip towards Rs 28,500.
US crude stockpiles
Crude oil could be range-bound with futures witnessing profit-booking following the US Fed’s move. But the counter is likely to be bullish on prospects of economic recovery.
Brent crude for delivery in February quoted at $110 a barrel and US crude for the same month at $98.82.
Soyabean, crude palm oil
The oils and oilseeds market is likely to trade sideways on uncertainty over weather behaviour in South America, particularly Argentina. Heat and dryness in Argentina are causing concern over the soyabean crop there but things could improve with a wet outlook forecast after Christmas.
US soyabean exports show a drop but continuing meal demand could hold up the complex.
Chicago Board of Trade soyabean contracts maturing for delivery in March fell to $13.14 a bushel in early Asian trade. Crude palm oil March contracts opened higher at 2,589 ringgit or $791 a tonne on Bursa Malaysia Derivatives Exchange.
Corn, wheat prices
Projections of higher production is seen putting pressure on wheat, while a threat to the Argentine corn crop is likely to support corn (industrial maize).
CBOT wheat contracts for delivery in March ruled at $6.05 a bushel and corn for the same month at $4.29 a bushel.