Hopes of the US Federal Reserve Bank announcing more stimulus measures to boost economy could drive gold higher on Tuesday. However, the dollar’s weakness against a basket of major currencies could cap gains.

Economists say that the US Fed will announce purchase of bonds worth $ 45 billion after its meeting on Tuesday and Wednesday. This would mean pumping money in the US economy to improve employment prospects.

This uncertainty over economy will force investors to shift to haven commodities such as gold. In early trade in Singapore, spot gold ruled steady at $ 1,710.70 an ounce, while gold futures were quoted at $ 1,713.

In the domestic market on Monday, gold for jewellery (99.5 purity) increased to Rs 31,205 for 10 gm, while pure gold (99.9 purity) advanced to Rs 31,340.

In the forex market, the dollar was down against the yen and euro in view of the speculation of US stimulus measures. Any weakness in the dollar will make imports cheaper. India depends on imports to meet its demand for commodities such as gold, crude oil and vegetable oils.

Expectations that the US Department of Agriculture will come up with data showing lower inventories drove soyabean higher on Chicago Board of Trade (CBOT). Export enquiries also aided the uptrend.

Soyabean January contracts closed higher overnight on CBOT at $ 14.74 a bushel.

A slower rise in stocks of palm oil helped crude palm oil on Bursa Malaysia Derivatives Exchange to increase with February contracts settling higher at 2,313 ringgit ($ 760) a tonne.

The grains complex could come under pressure with wheat and corn futures dropping on CBOT following projections of rains in Brazil and dry weather in Argentina that could help improve production.

Overnight on CBOT, Corn March futures slipped to $ 7.30 a bushel, while wheat for delivery the same month slid to $ 8.48 a bushel.

The rupee’s rise against the dollar could also support a downtrend.

Crude oil dropped on concerns over recovery in growth. This could mean that natural rubber will also drop. Natural rubber sways to crude oil movements as its alternative synthetic rubber is derived from crude oil.

Brent crude oil for delivery in January quoted at $ 107.33 a barrel, while NYMEX crude settled lower $ 85.56 a barrel.

(This article was published on December 11, 2012)
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