Gold prices in the domestic spot and futures market are set to head lower after a sharp drop in the global market overnight.

Prices fell on Thursday night after US retail sales data indicated remarkable economic recovery. This led to renewed fears that the US Federal Reserve could decide on cutting its $85-billion-a-month stimulus programme during its December 16-17 meeting.

The general view is that the tapering could happen earlier than expected.

Gold holdings in SPDR Trust

Other bearish factors for gold are investors cashing out, particularly from exchange-traded funds. Gold holdings in SPDR Trust, the world’s biggest exchange-traded fund, dropped to 827.60 tonnes.

Rupee movement

In the Indian context, the starting of an inauspicious period from December 15 to January 15 could dampen the demand for gold. However, gold’s movement could also hinge to some extent on how the rupee moves against the dollar.

A weak rupee against the dollar makes import of gold, crude oil and vegetable oils costlier.

Spot gold, gold futures

In early Asian trade, spot gold was down at $1,227.54 an ounce and gold futures maturing for delivery in February at $1,226.80.

In the domestic market, NCDEX spot gold ended lower at Rs 30,100 for 10 gm. On MCX and NCDEX, gold February futures could slip towards Rs 29,000.

Range-bound trading

Crude oil is likely to be range-bound caught between rising demand and prospects of the pruning of the stimulus programme.

Brent crude for delivery in January was down at $108.77 a barrel and US crude at $97.53.

Canada’s upgrading of its canola crop and better prospects for South American soyabean crop are likely to put pressure on the oils and oilseed market. Palm oil, on the other hand, could slip as demand generally wanes during winter.

Soyabean, crude palm oil

Chicago Board of Trade soyabean for delivery in January was down at $13.22 a bushel. Crude palm oil contracts maturing for delivery in February opened lower at 2,592 ringgit or $800.5 a tonne on Bursa Malaysia Derivatives Exchange.

Projections of higher corn and wheat crops are likely to drag the foodgrain complex.

CBOT wheat contracts maturing for delivery in March.