Looks like the bears had been waiting for this. Gold prices plunged overnight despite US Federal Reserve Chairman Ben Bernanke’s comments that there was no “pre-set course” to end the stimulus programme.
Initially, gold gained marginally before the bears struck with the market changing its stand that the Fed could begin cutting down the programme to pump $85 billion-a-month to buy bonds and other assets to keep the economy ticking at a healthy rate by the year-end.
Again, the yellow metal has been unable to pierce through the $1,300 an ounce-mark that is turning out to be some sort of the Chinese Great Wall.
Producers beginning to hedge after 12 years, India’s move to curb gold purchases and investors reducing their holdings of the precious metal in electronic form are all factors that are dragging gold.
So, expect gold to continue its southward journey on Thursday in the domestic spot and futures market. The currency market, which could be range-bound, may not have much of an impact until and unless rupee gets mauled.
Any fall in rupee against dollar that makes import of gold, crude oil and vegetable oils costlier could be capped by the Government’s measures to attract more foreign investments.
Gold holdings in the world’s biggest exchange-traded fund SPDR have dropped to over four-year low of 936.07 tonnes.
Spot gold, gold futures
In early Asian trade, spot gold ruled lower at $1,278.69 an ounce, while gold futures maturing in December quoted at $1,270.40.
In the domestic market, gold for jewellery (99.5 per cent purity) closed marginally higher at Rs 26,685 for 10 gm and pure gold (99.9 per cent purity) at Rs 26,825. On MCX, look for August contracts to drop to Rs 26,300 levels.
Crude oil is likely to rise on data showing that inventories in the US dropped to a six-month low. Brent crude futures maturing in September were up at $108.50 a barrel and West Texas Intermediate crude futures for the same month at $106.43.
Better weather forecast in growing area of the US is likely to dampen the sentiment on the oils and oilseed complex. Peak tapping season for palm oil, a favourable Indian monsoon helping plantings soar and a bearish outlook in the long-term are factors that would have a significant effect.
Soyabean, crude palm oil
Chicago Board of Trade soyabean futures maturing in November ruled lower at $12.78 a bushel. Crude palm oil futures for delivery in October were up at 2,279 ringgit or $714 a tonne.
Weather forecast is set to drag corn (industrial maize) and wheat prices too. Hopes that the US corn crop will fare better are putting pressure on the grains complex.
CBOT corn futures maturing in December have dropped below $5 a bushel again to $4.98. Wheat futures for delivery in September are trading lower at $6.64 a bushel.
Natural rubber could gain but it could be capped by import threats since global prices are far lower than domestic price. The driving factor here could be rising crude oil prices.
On Tokyo Commodity Exchange, rubber contracts for delivery in December were up at 247.9 yen or Rs 146.75 a kg.