Gold dropped after two days of gain in the global market in early Asian trade on Wednesday.
But the scenario is seen turning around quickly during the day as China’s disappointing data could be enough a tool for the bulls to strike. In fact, the entire commodities complex could swing to the Beijing’s tunes in early part of the day.
China economic data
China reported a 3.7 per cent drop in exports and 0.7 fall in imports, signalling that global economy is not growing as it is deemed to be and the weakness could persist.
This could mean that various governments could toy with the idea of extending their stimulus programme. All these could be unfurl as the day wears out.
The bulls' hope could be short-lived since other important factors are set to roll out later in the day.
US Federal Reserve Chairman Ben S. Bernanke will be the man in focus as he is expected to spell out the country’s policy on whether the programme to boost the economy will continue. Minutes of the June Fed meeting will also unveiled to top a hectic day for gold watchers.
Any signs of the US cutting its plan to spend $85 million a month to boost its economy will give the bears the space to manoeuvre and hammer the precious metal.
Until the Chinese data provided the glimmer of hope to the bulls, the bears got a head-start with holdings of the yellow metal in electronic forms in exchange-traded funds dropping. SPDR Trust, world’s biggest for gold, reported further fall in holdings at 939.75 tonnes.
Spot, futures gold
On the domestic spot and futures markets, currency movements could provide further clue, though it is likely that the rupee will gain, at least marginally, in view of the steps taken by the Government.
Any fall in the rupee against the dollar can make import of commodities such as gold, crude oil and vegetable oils costlier.
In early Asian trade, spot gold dropped to $1,246.73 an ounce, while gold futures maturing in August slid to $1,245.50.
In the domestic market on Tuesday, gold for jewellery (99.5 per cent purity) rose to Rs 26,290 for 10 gm and pure gold (99.9 per cent purity) to Rs 26,430.
On MCX, August gold futures could rise towards Rs 26,200.
Crude oil gained with the rise in US equities overnight but the Chinese data could change all that.
Brent crude for delivery in August rose to $107.74 a barrel, while West Texas Intermediate crude contracts for next month were up at $104.32.
The oils and oilseeds complex could be range-bound as concerns over a heat wave affecting US soyabean plantings in Mid-west are driving the market. Peak palm oil production season and a favourable Indian monsoon are the factors that could deter the rise.
Soyabean, crude palm oil
Chicago Board of Trade (CBOT) soyabean for delivery in November ruled at $12.75, paring overnight gains a tad. Crude palm oil futures maturing in September quoted at 2,385 ringgit ($749) on the Bursa Malaysia Derivatives Exchange.
Wheat and corn (industrial maize) are also set to rise on worries over the heat wave. While one heat wave is set to strike the US Mid-west this week-end, another is likely next week.
This could lead to a lower crop against projections of a record output. Chinese huge imports in the last few days are also arming the bulls.
Wheat, corn futures
CBOT wheat for delivery in September rose to $6.73 a bushel, while corn futures maturing in December were up at $5.19 a bushel.
Natural rubber will find it hard to sustain its huge gains in the last couple of sessions in the domestic market.
The difference between domestic and global prices is huge that imports look likely. Also, China is reporting problems with liquidity that is affecting sales of automobiles.
On the Tokyo Commodity Exchange, rubber December futures dropped to 234.3 yen or Rs 144.50 a kg.