Gold prices on domestic spot and futures markets are set to gain on Friday in line with the two per cent rise in the global market overnight.

A cocktail of poor Chinese factory output growth, better European manufacturing sector growth leading to a drop in the dollar and a fall in the equities market drove the yellow metal higher to a three-month high.

US growth data

In the US, resale of homes rose but jobless claims were marginally higher than the previous week and factory activity slowed in December. The data gave bulls some opportunity to push up gold since the US Fed Reserve could now take a lenient view of pruning its programme to pump money into the economy, by buying bonds and other assets. Currently, it spends $75 billion a month and is expected to scale down the programme in due course of time.

A decision is likely during the January 28-29 Fed open market committee meeting.

Curbs on gold import

To add to these, the gold market has been buoyed by the report that Sonia Gandhi, leader of India’s ruling Congress Party, has written to the Commerce Ministry to ease curbs on gold imports.

India took hard measures against gold imports by raising the Customs duty to 10 per cent last year, besides making it mandatory for importers to re-export 20 per cent of every consignment of the yellow metal that is brought into the country. This has cut down imports sharply.

But Gandhi’s letter, in response to a plea from the jewellery trade, is seen as a sign that curbs may ease. Finance Minister P Chidambaram has, however, ruled out any review until the current account deficit or the trade imbalance caused by higher foreign exchange outgo is rectified.

However, gold could find $1,275 a stumbling block to conquer. On the investment side, gold holdings in SPDR Trust, world’s biggest exchange-traded fund in the metal, slipped to 790.46 tonnes. Also, higher prices could dissuade Asian buyers who seem comfortable at prices around $1,200 only.

In the domestic market, currency moves could have some influence and any drop in the dollar against the rupee will make imports of commodities such as gold, crude oil and vegetable oils cheaper.

Spot gold, gold futures

In early Asian trade, gold ruled at $1,260.11 an ounce and gold futures maturing for delivery in February at $1,259.80.

On NCDEX, spot gold closed lower at Rs 29,500.

On MCX and NCDEX, gold February contracts could rise and may top Rs 29,250.

Crude oil to rule firm

Crude oil is likely to rule firm on decline in US distillate stocks and recovery in Europe and US factory activities. China’s slower factory output growth could weigh, though.

Brent crude was quoted at $107.68 a barrel and US crude at 97.42.

Soyabeans under pressure

Pressure on US soyabeans on fears of China cancelling imports and switching over to beans from South America and better weather forecast for Argentia’s crop are likely reflect in the oils and oilseeds markets. Soyabean harvest in Brazil will add to the pressure in the market.

Chicago Board of Trade soyabean for delivery in March dropped to $12.76 a bushel. Crude palm oil on Bursa Malaysia Derivatives Exchange for delivery in April opened lower at 2,588 ringgit or $777 a tonne.

Wheat on higher side

A threat from the winter freeze to the US crop and higher demand for European wheat, besides buying by West Asian and African countries could drive wheat higher. This, in turn, could help corn (industrial maize) pare some of its recent losses.

CBOT wheat contracts maturing for delivery in March were up at $5.71 a bushel and corn contracts for the same month at $4.28 a bushel.

(This article was published on January 24, 2014)
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