Gold is likely to continue losing glitter in the domestic market on Wednesday as the dollar slipped in early trade and the yellow metal rules below the $ 1,700-an-ounce mark.
Overnight, data from the US showed that is factory output dropped to a three-year low, while a solution still eludes its fiscal crisis. The euro, on the other hand, was firm at a seven-week high against the greenback. Asian currencies, including the Australian dollar, made headway in early Asian trade, putting all-round pressure on the US currency.
This could see the rupee adding to its Tuesday’s gains. Any rise in the value of rupee makes gold imports cheaper as India depends on purchases from abroad to meet its demand.
In early trade, spot gold ruled at $ 1,696.15 an ounce, while gold futures for delivery in February quoted at $ 1,697.90.
In the domestic market, gold for jewellery (99.5 purity) closed lower at Rs 31,210 for 10 gram on Tuesday and pure gold (99.9 purity) slipped to Rs 31,345.
The oils and oilseed complex could also see a drop in prices, particularly with the Malaysian crude oil in the grips of the bear for almost a week and slipping below 2,300 ringgit (MYR) a tonne. The market awaits developments in Argentina where more rains could see farmers switching over to grow more soyabean than corn. Higher palm oil stocks in Malaysia and Indonesia are other bearish factors. The rising rupee could also cast its spell since India imports about 10 million tonnes of vegetable oil, mostly palm oil, to meet its increasing demand.
Overnight, soyabean for delivery in January on the Chicago Board of Trade (CBOT) was up at $ 14.55 a bushel.
On Tuesday, crude palm oil on the Bursa Malaysia Derivatives Exchange plunged to 2,298 ringgit ($ 756) a tonne.
The drop in the dollar could see the grains counter under pressure since rising rupee will tend to make exports uncompetitive. Indian wheat and corn is in demand abroad due to short-supply in key growing nations in the Americas and the Black Sea region.
Corn (industrial maize), in particular, looks vulnerable in the face of weak export demand and Brazil offering the grain at $ 30 a tonne discount to the US price.
On the CBOT, wheat for March delivery declined to $ 8.56 bushel, while corn for delivery the same month dipped to $ 7.52 a bushel.
Crude oil could also head lower at prices in the global market dropped on the stalemate in US budget and speculation that US oil data could show higher stockpiles.
Brent January crude contracts dropped below $ 110 a barrel to $ 109.84, while NYMEX crude ruled at $ 88.5 a barrel.
Any rise in crude oil from which synthetic rubber is derived can help a rally in natural rubber. Since the opposite is happening, spot and futures in natural rubber could take a hit.