Gold futures declined to seven-week low in overseas market on weak global cues, stronger dollar

Gold futures declined to seven-week low
Gold futures, on Tuesday, slumped to seven-week low in international market after the Federal Reserve meeting. The Federal Reserve disappoints the investors as it took no additional monetary policy steps to stimulate the U.S. economy.

However, the central bank said the U.S. is “expanding moderately, notwithstanding some apparent slowing in global growth." On MCX, gold futures posted the marginal gains due to rupee-dollar fluctuations in currency market.

Rupee is depreciating up to the new lows against dollars and hence the losses in international market were overshadowed in domestic market.

Moreover, the U.S. dollar extended its gains against the Euro after the Fed indicated no additional policy measures to stimulate the U.S. economy. The U.S. dollar, a measure of the value of the United States dollar relative to a basket of foreign currencies, reached at 11-month high of 80.4 and settled at 80.27 on Tuesday in the overseas market.

A stronger dollar reduced the investment appeal in the precious metals as it makes the commodities more expensive for investors to buy commodities denominated in the greenback.

At the Commodity Exchange (COMEX), gold futures for February 2012 delivery on Tuesday closed at USD 1,663.1 per ounce, after opening at USD 1,668 against the previous closing price of USD 1,668.2. It touched the intra-day low of USD 1,625.5 with a business volume of 171,752 lots.

At MCX, gold futures for February 2012 contract closed at Rs. 28,871 per 10 grams, up by 0.08 per cent, after opening at Rs. 26,712 against the previous closing price of Rs. 28,847. It touched the intra-day high of Rs. 29,027 with a business volume of 44,968 lots.

Amid weakening of the Indian currency against the U.S. dollar, gold imports in India, the world's largest gold consumer, is expected to decline as much as 16 per cent from a record, according to the Bombay Bullion Association.

Purchases may fall as low as 800 tons this year from 958 tons in 2010, Prithviraj Kothari, the group's president, said yesterday.

Dion Global Solutions Ltd

Read more about: gold, dollar, mcx
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