With Russian President Vladimir Putin upstaging US President Barack Obama on the Syrian tangle, gold could come under further pressure on the domestic spot and futures market.

However, a rebound in physical buying that emerged in Asia on Wednesday morning could cushion any sharp fall in the precious metal’s prices.

Syrian crisis

Overnight, Putin agreed to mediate in the Syrian crisis saying that he would make its President Bashar al-Assad agree for the inspection of Damascus’ chemical weapons by other countries. But he also put the condition that the US should defer any thought of taking military action against Syria.

The US seems to have taken up the offer, with Obama putting off the Congress vote to decide on action against Syria.

These developments have eased worries over the geo-political situation which usually sees investors hedging their bets on gold as the safe investment during such times.

Fed stimulus

That gone and the US Fed Reserve set to make public its further plans on the monthly $85-billion stimulus package next week; a bit of weakness has set-in in gold.

In the Indian context, the rupee’s strong rally since last week against the dollar has made imports of gold, crude oil and vegetable oils a little cheap.

But investors in Asia seemed to see the current price as a buying opportunity, pushing the yellow metal marginally up in the opening trade. In India, too, some buying could emerge if prices drop below Rs 30,000 for 10 gm.

Fed move, key US data

However, whether gold will find support at these levels or could tend to drop more depends on the Fed move and a few data that are due to be released this week.

On Wednesday, US weekly mortgage index and wholesale inventories data should provide some clue on the progress the economy is making.

Spot gold, gold futures

In early Asian trade, spot gold in Singapore climbed to $1,366.65 an ounce and gold futures maturing in December to $1,366.60.

In the domestic market on Tuesday, gold for jewellery (99.5% purity) dropped to Rs 30,420 for 10 gm and pure gold (99.9% purity) to Rs 30,585. On MCX, gold October contracts could trade between Rs 31,000 and Rs 31,250.

Crude oil

The US deferring its vote to decide on against Syria could also cool crude.

Brent crude for delivery in October slipped to $111.32 a barrel and West Texas Intermediate crude for the same month to $106.92.

The oils and oilseeds complex is likely to head further south as the soyabean crop in the US seems to be better and heads for a better harvest than last year. With peak season for palm production approaching besides Indian kharif harvest, the market could be flooded with supplies.

Soyabean, crude palm oil

Chicago Board of Trade soyabean for delivery in November traded lower at $13.45 a bushel. Crude palm oil on the Bursa Malaysia Derivatives Exchange to be delivered in November opened higher at 2,355 ringgit or $720 a tonne.

The grains complex could see some heat on the US report of 54 per cent of the corn (industrial maize) crop being in good shape against 56 per cent a week ago. With wheat also tending to gain, coarse cereals will pick up.

For wheat, the driver is demand coming in for Egypt and Iran with prices slipping to a four-year low. Though orders are flowing mainly for the crop from the Black Sea region, other destinations are also set to gain in tandem.

Wheat export sales

According to the USDA, wheat export sales have increased 38 per cent in the last three months compared with the same period a year ago.

The European Union permits for exports have increased, while global inventory is feared to drop to a five-year low at the end of the current season in June.

CBOT corn for delivery in December quoted at $4.66 a bushel and wheat contracts maturing the same time at $6.45 a bushel.

(This article was published on September 11, 2013)
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