Gold prices in the domestic spot and futures market are likely to come under further pressure on Monday as Iran’s agreement with world powers on its nuclear programme spells further trouble for the yellow metal.

Iran on Sunday had reached a deal to curb its nuclear programme and in turn had sanctions on oil, automobile parts, gold and other precious metals lifted. The deal, more importantly, eases geo-political tensions and reduces gold’s appeal as an instrument to hedge during times of such tensions.

In addition, gold is also under pressure on comments by US Federal Reserve officials that the central bank could discuss plans on tapering the $85-billion-a-month stimulus programme during its policy meeting next month.

SPDR Gold Trust

Data from SPDR Gold Trust, the world’s biggest gold exchange-traded fund, showing that holdings dropped to 852.21 tonnes during the week-end are also bearish for the precious metal.

The only factor that can hold gold up is any drop in rupee against dollar. A weak Indian currency against the dollar makes imports of gold, crude oil and vegetable oils costlier. Value-buying, particularly in Asia, could also help gold.

Spot gold, gold futures

In Asia, spot gold fell to $1,242.19 an ounce and gold contracts maturing for delivery in February ruled at $1,241.80.

In the domestic market on Saturday, gold for jewellery (99.9 per cent purity) fell to Rs 30,665 for 10 gm and pure gold (99.9 per cent purity) to Rs 30,815.

On MCX and NCDEX, gold for delivery in December will continue to rule below Rs 30,500.

Crude oil

The Iran nuclear deal will also result in crude oil heading lower since concerns over supplies will ease.

Brent crude for delivery in January dropped to $108.62 a barrel and US crude to $94.

Oils, oilseeds

Better weather conditions in South America and reports of Indonesia likely to end up with higher palm oil stocks could dampen the oils and oilseeds market. Though there are now talks of a dry weather affecting the US crop next year, views are divided.

Chicago Board of Trade soyabean contracts for delivery in January slipped to $13.17 a bushel and crude palm oil February contracts opened higher at 2,642 ringgit or $820.5 a tonne.

Demand for wheat from Brazil will hold its prices, while corn (industrial maize) could also gain on value buying.

On CBOT, wheat contracts maturing in March were up at $6.60 a bushel and corn contracts for the same month at $4.30 a bushel.

(This article was published on November 25, 2013)
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