So, US Federal Reserve Chairman Ben Bernanke has spelt out what the bullion market had dreaded all along. The Fed will end pumping money by buying bonds worth $85 billion every month later this year.
The fears had been swaying the market for sometime, though physical buying especially in Asia, and lower-than-expected growth in some nations had been propping the precious metal up.
With the Fed now making its stand clear, gold prices are all set to come under pressure. For the domestic spot and futures markets, the drop will be despite the consequent fall in the rupee.
There is more bad news for the gold bulls as its holdings in electronic form on exchange-traded funds dropped to the lowest in four years. In fact, holdings in world’s largest gold-backed trust SPDR have fallen below 1,000 tonnes.
Reflecting the overall gloom, spot gold in early Asian trade slipped to $1,342.80 an ounce, while gold futures maturing in August fell to $1,342.10.
In the domestic market on Wednesday, gold for jewellery (99.5% purity) was down at Rs 27,925 for 10 gm and pure gold (99.9% purity) at Rs 28,070.
On MCX, look for August contracts to fall to as low as Rs 27,750 if the rupee holds or gains as it happened on Wednesday. The extent of fall in gold will also depend on the rupee’s movement against the dollar since any drop in the Indian currency will make imports of gold, crude oil and vegetable oils costlier.
A rise in US stocks could continue to keep crude oil cool. Brent crude for delivery in August ruled steady at opening in Asia at $105.30 a barrel, while West Texas Intermediate crude on NYMEX for July delivery quoted at $97.46 on NYMEX.
Oils and Oilseeds
Fears of heat affecting the US soyabean crop could likely perk up the oils and oilseeds counter. However, talk of China importing less of soyabean from the US could temper the rise.
Chicago Board of Trade (CBOT) soyabean for delivery in November ruled at $13.06 a bushel, while crude palm oil on Bursa Malaysia Derivatives Exchange on Wednesday ended at 2,472 ringgit ($784) a tonne.
The grains complex could be fired up by concerns that heat could affect the US corn (industrial maize) plant more since it could take a toll on pollination. Also, reports from conservative groups that the US acreage is lower are giving rise to fears that planting could have been even lower.
Wheat, on the other hand, is looking bullish on China buying over seven lakh tonnes of French wheat, raising hopes of further buy from other sources.
CBOT corn for delivery in December gained at $5.64 a bushel, while wheat due to be delivered in September ruled at $7.09.
Both these counters have made smart gains over the last couple of sessions.