Gold could tend to head lower in the domestic and futures market on Tuesday as the yellow metal perhaps gained too sharply, too quickly.
Besides, the outlook is still bearish with Monday’s gains coming primarily from funds indulging in short-covering.
On the other hand, the Reserve Bank of India stipulation that 20 per cent of imports will mandatorily have to be for value-added exports, the counter is likely to come under pressure.
The weakening of the dollar, especially after Japan’s Shinzo Abe got the mandate for new term, is likely to keep gold firm. But in the Indian context, it will cap gains since a weak dollar against the rupee means import of commodities such as gold, crude oil and vegetable oils will be cheaper.
Also, the rise seems to be encouraging investors to cash out further going by the fall in holdings of gold in electronic format through exchange-traded funds. SPDR gold trust, the world’s largest, said that its gold holdings have dropped to 931.26 tonnes.
Fed stimulus
That should be a cause for worry to those wanting to invest in the yellow metal. There is also the lurking fear that the US could announce winding up of its stimulus programme sometime later this year.
Gold dropped initially in early Asian trade but then stabilised. At 9 a.m. IST, spot gold in Singapore ruled at $1,336.67, while gold futures maturing in December were up at $1,337.
Spot gold, gold futures
In the domestic market on Monday, gold for jewellery (99.5 per cent purity) surged to Rs 27,325 for 10 gm and pure gold (99.9 per cent purity) to Rs 27,465. On MCX, August contract may try to rise to Rs 27,000.
Crude oil is seen under pressure as the US data was weaker than expected, leading to fears that growth may not be as good as it was hoped to be.
Brent crude
Brent crude oil futures maturing in September ruled at $108.14 a barrel and West Texas Intermediate for the same month at $107.03.
A sudden demand for soyameal from crushers, particularly in the US due to drought affecting the crop last year, could result in oils and oilseeds complex ruling range-bound. The weakening dollar could cap gains.
Soyabean, crude palm oil
On Chicago Board of Trade, soyabean futures maturing in November ruled at $12.85 a bushel. On Bursa Malaysia Derivatives Exchange, crude palm oil for delivery in October was up at 2276 ringgit or $715.5 a tonne.
Prospects of rain and cooler weather that could result in a healthy corn (industrial maize) in the US will put pressure on the grains complex. Wheat, too, is likely to head south in line with corn.
CBOT corn futures maturing in December were down at $4.93 a bushel and wheat futures maturing in September at $6.58 a bushel.