Gold is likely to trade sideways in the domestic spot and futures market on Tuesday as the market weighs the demand, especially from China, against waning investor interest.
Overnight, the market saw gold prices tumbling $30 an ounce all of a sudden before the trading was stopped and then resumed. Since then, gold managed to crawl back to the levels seen on Monday.
But these are grim reminders of the pressure that gold is likely to come under in view of uncertainty among investors. On Monday, falling equities market and a flat dollar helped gold gain.
The other factor pushing up gold was shipments to China from Hong Kong doubled to over 1,000 tonnes till November, a clear signal that India has been overtaken.
SPDR gold trust
Gold holdings in SPDR gold trust, the biggest exchange-traded fund backed by the yellow metal, was unchanged at 794.62 tonnes, while data from the US Commodity Futures Trading Commission showed that funds and money managers increased their bullish bets on gold.
In India, currency could play a role, albeit a minor one. Any drop in the rupee against the dollar could make commodities such as dollar, crude oil and vegetable oils costlier.
Spot gold, gold futures
In early Asian trade, spot gold was quoted at $1,242.55 an ounce and gold futures maturing for delivery in February at $1,241.70.
NCDEX spot gold was unchanged at Rs 29,600 for 10 gm. MCX and NCDEX gold February contracts are likely to trade below Rs 29,500.
Crude oil is likely to head lower on bets that stocks in the US rose. But cold weather in the US and the Libyan factor could cushion it from falling sharply.
Brent crude February contracts were quoted at $107.25 a barrel and US crude at $93.72.
Demand for soyameal and concerns that dry weather in Argentina could put more stress on the soyabean crop are likely to help the oils and oilseeds market to keep its head above water. Pressure is likely from the continuous arrival of domestic oilseeds crop.
Soyabean, crude palm oil
Chicago Board of Trade soyabean contracts maturing for delivery in March were down at $12.70 a bushel in early Asian trade. Crude palm oil March contracts opened lower at 2,579 ringgit or $784 a tonne.
Fears that cold snap in the US could affect the winter wheat, despite higher area under the crop, and higher export enquiries are likely to keep wheat firm. Corn (industrial maize), too, could gain in tandem and also due to short-covering.
CBOT wheat for March delivery ruled at $6.07 a bushel and corn for the same month at $4.27.