Commodities

Prospects look bleak for gold

M. R. Subramani Chennai | Updated on March 12, 2018

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Things aren’t looking up for gold with all indicators pointing downwards. Data last night from the US showed that factory output rose to a two-and-a-half year high. In fact, factory output across the globe showed revival of economic activity.

US Commodity Futures Trading Commission data showed that big players in gold are cutting their bullish bets. Adding to the bearish trend is the report of sales of gold bars and coins dropping in the US and Australia.

Fed stimulus tapering

These are strong indicators that the US Federal Reserve’s hands could be forced to end the $85-billion-a month stimulus programme when it meets during December 17-18.

The trend is likely to be reflected back home with gold prices in the domestic spot and futures likely to head south.

Easing of demand

The marriage season, heading for a break from December 15 until January 15, could see demand easing for gold. The only bullish factor can be any weakening of the rupee since a drop in the Indian currency against the dollar can make import of gold, crude oil and vegetable oils costlier.

In early Asian trade, spot gold was quoted lower at $1,220.84 an ounce and gold futures maturing for delivery in February at $1,220.10.

Spot gold, gold futures

In the domestic market on Monday, gold for jewellery (99.5 per cent purity) dropped to Rs 30,505 for 10 gm and pure gold (99.9 per cent purity) to Rs 30,655.

On MCX and NCDEX, gold February contracts could trade lower than Rs 29,500.

Crude oil stockpiles

Crude oil is likely to come under pressure as stockpiles are expected to be higher in the US. OPEC maintaining its supply will aid the trend, while any sharp fall is likely to be cushioned by positive factory data.

Brent crude for delivery in January ruled at $111.14 a barrel and US crude for the same month at $94.08.

The oils and oilseeds market could fall on reports of better soyabean prospect in South America. The USDA sees the crop in Argentina at a record 57.5 million tonnes.

Soyabean, crude palm oil

Chicago Board of Trade soyabean contracts maturing for delivery in January ruled at $13.24 a bushel. Crude palm oil February contracts opened lower on Bursa Malaysia Derivatives Exchange at 2,634 ringgit or $818 a tonne.

Contrasting trend

Wheat and corn (industrial maize) prices could see a contrasting trend. Concerns over US winter crop and demand from Egypt may lift wheat. Higher production and China playing truant in the export market could smother corn.

CBOT wheat for delivery in March ruled at $6.63 a bushel, while corn for the same month at $4.25 a bushel.

Published on December 03, 2013

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