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Gold is likely to head south in the domestic market on Friday as the yellow metal dropped below $1,650 an ounce in the global market. The precious metal plunged by over one per cent overnight on reports that the US Federal Reserve officials are concerned over buy back of bonds in the financial markets.
The release of the December policy meeting minutes showed that the officials are reluctant on easing money flow further. It leads to the hammering of gold and silver.
On the other hand, the dollar index also improved to four-week high with the greenback rising to a two-and-a-half year high against the yen early in Asian trade.
If the rupee, too, drops against the dollar, then, it could temper the drop in domestic gold prices. This is because a rising dollar will make imports of commodities such as gold, crude oil and vegetable oils costlier. India imports a good quantity of these to meet its rising demand.
In Singapore, spot gold dived to $1,646.15 an ounce, while gold futures for February were quoted at $1,647.
In the domestic market on Thursday, gold for jewellery (99% purity) increased to Rs 30,795 for 10 gm, while pure gold (99.9% purity) quoted higher at Rs 30,930.
The oils and oilseeds complex will also likely come under pressure after soyabean dropped on the Chicago Board of Trade (CBOT) overnight. The situation looks a little dicey after China cancelled deals for US soyabean, the third time in two weeks, on hopes that the upcoming crop in Brazil and Argentina will be a bumper.
Crude palm oil on Bursa Malaysia Derivatives Exchange also came off two-month high on Thursday on fears over demand.
Overnight, soyabean for delivery in March dropped to $13.86 a bushel, while palm oil for delivery the same month ended at 2,475 ringgit ($816) a tonne.
The grains complex could rise as the dollar gained. A fall in the rupee makes exports competitive and therefore, wheat and corn (industrial maize) could gain in the domestic market.
On CBOT, wheat March contracts were up at $7.55 a bushel and corn contracts of the same month quoted lower at $6.89.
The concerns raised by Fed officials also smothered dragged crude oil. This could lead natural rubber lower since its alternative synthetic rubber, derived from crude oil products, is likely to head south.
Brent crude quoted at $112.14 a barrel, while NYMEX crude ruled at $92.92 a barrel.
Sugar prices, too, will join the commodities seeking lower level as raw sugar for delivery in March dropped further to 19.06 cents a pound.
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