Gold prices on spot and futures markets are likely to be under pressure on Monday after prices dropped during the weekend. Prices tumbled as fears of the US Federal Reserve pruning its $80-billion-a-month stimulus package began to grip the market again.

James Bullard, President of St Louis Fed, said the US Federal Reserve could still consider tapering the stimulus at its meeting in October.

In addition, the US Commodity Futures Trading Commission reported that hedge funds and money managers cut their bullish bets in gold futures and options market.

The world’s largest exchange-traded fund in gold, SPDR Trust, reported nearly two tonnes fall in its holding of gold to 910.19 tonnes.

Factors deciding gold’s movement

Gold’s movement could be decided on Monday on a couple of factors too. One, a slew of purchase managers’ index or factory output data is due across the globe starting from China to nations in Europe to the US. It could hold clue to how the economy has recovered or are there any signs of recovery at all.

All Asian markets’ movements were influenced on hopes that China would report some recovery.

Currency movements, particularly the rupee’s against the dollar, will have some impact as any gain in the Indian rupee will make imports of commodities such as gold, crude oil and vegetable oils cheaper.

In early Asian trade, spot gold quoted at $1,314.83 an ounce after rising to $1,326.75 an ounce and gold futures maturing in December fell to $1,314.

Spot gold, gold futures

In Mumbai on Saturday, gold for jewellery (99.5% purity) dropped to Rs 30,000 and pure gold (99.9% purity) to Rs 30,145 for 10 gm.

On MCX, gold contracts expiring in October could drop to levels of 30,000.

Crude oil

Crude oil prices are likely to trade sideways as worries over supply disruptions in West Asia have eased. Also, Brent crude is seen under pressure to drop to levels of $100 a barrel once the US cuts its stimulus programme.

Additional supplies and the emergence of shale gas as an alternative that are other factors that could cast a shadow on crude oil in the long-term.

For the time-being, the purchase managers index could hold key as any recovery in the economy can propel the complex higher.

Brent crude for delivery in November quoted at $109.07 a barrel and West Texas Intermediate crude for the same month at $104.56.

Oils and Oilseeds

The oils and oilseed complex could head south as the peak production season is set to begin in Indonesia and Malaysia for palm oil. Kharif oilseeds harvest in India will add to the pressure.

A global meet on vegetable oils in Mumbai was told during the weekend that Malaysian palm oil could find its bottom at 2,100 ringgit in the near-term, though it could drop further if crude oil slips below $100 and rains prove beneficial in South America around Christmas time.

In early trade, Chicago Board of Trade soyabean contracts maturing in November ruled flat at $13.15 a bushel. Malaysian palm oil had closed during the weekend at 2,297 ringgit or $$734 a tonne.

Grains complex

Prospects of higher production and carryover stocks could begin driving the grains complex lower. However, higher export orders are keeping wheat prices up currently.

In early trade, corn (industrial maize) December contracts gained at $4.47 a bushel, while wheat contracts for the same month ruled at $6.48 a bushel.

(This article was published on September 23, 2013)
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