Gold prices on the domestic spot and futures market are likely to gain further on Monday as uncertainty over the US Budget impasse continues.

The US Congress has to break the deadlock or else there could be a shutdown in the Government, the first after 1996.

The Representatives had on Sunday voted to cut many of the provisions of the Health Care Act or Obamacare. It approved the Government funding subject to the condition that the Obamacare programme will be put off by a year. The US Senate will have to approve it now to end the stalemate.

Fiscal crisis

Fears over the  US fiscal crisis resulted in the dollar tumbling and helping the gold gain in the bargain.

In early Asian trade, spot gold ruled higher at $1,339.74 an ounce after having nearly touched $1,355 at one point of time. Gold futures maturing in December quoted at $1,340.

Currency movement

Currency movement could also have a say in gold’s movement since a stronger Indian currency against the dollar makes import of commodities such as gold, crude oil and vegetable oils cheaper.

Other bullish factors in favour of gold are the oncoming festival season and the kharif crop harvest that has just begun. Most of the crops in the kharif season could see a higher harvest compared with last year and it is likely that rural India could turn to gold for securing its profits.

Spot gold, gold futures

In the domestic market on Saturday, gold for jewellery (99.5 per cent purity) rose to Rs 30,465 for 10 gm and pure gold (99.9 per cent purity) to Rs 30.610.

On MCX, gold October contracts could rise above Rs 30,000.

Crude oil prices

Crude oil is likely to head lower on the deadlock over the US Budget. Easing geo-political tensions in West Asia, thus easing supply concerns, will also help prices cool.

Brent crude for delivery in November dropped to $107.80 a barrel and West Texas Intermediate crude for delivery in the same month to $101.65. 

The oils and oilseeds complex could also cool on Monday on concerns over weather in South America and speculation that the US Department of Agriculture could increase its yield outlook for the soyabean crop.

But any sharp fall is unlikely in view of demand and strong US export sales.

Soyabean, crude palm oil

Chicago Board of Trade (CBOT) soyabean contract to be delivered in November dropped to $13.11 a bushel in early Asian trade. On Bursa Malaysia Derivatives Exchange, crude palm oil December contract opened lower at 2,304 ringgit or $707.50 a tonne.

Mixed trend

The grains complex could see a mixed trend with wheat rising on demand from China and corn (industrial maize) slipping on hopes of higher productions in the US and Ukraine.

Though wheat will rise, its gain could be capped since its premium over corn has widened to over $2 a bushel, which traders say is unsustainable.

Wheat is also helped by reports that sowing of winter crop in Ukraine has been affected due to rains. Plantings are far behind and could finally end up around 3 million hectares against a target of 7 million hectares.

CBOT wheat for delivery in December ruled at $6.81 a bushel and corn futures maturing in December at $4.53.

(This article was published on September 30, 2013)
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