Gold prices on the domestic spot and futures market are likely to gain on Tuesday as the global market looks to physical demand from India to lift the precious metal from its current mess.
At least in Asian markets, the hopes seem to be bright as gold jumped by over $14 an ounce.
Curbs on gold import
Gold imports by India dropped some 80 per cent in June on a couple of measures taken by the Government to bring down the current account deficit. One, the Centre raised the import duty on gold and two, the Reserve Bank of India stopped funding consignment purchases of gold.
Though the curbs still remain, speculation is that buying could resume in India ahead of the festival that starts with Ganesh Chathurthi and ends with Diwali. The marriage season in between these is also expected to perk up demand.
Rupee Vs dollar
Still, there are a couple of slips that are likely between the cup and lip. One, the rupee has to gain against the dollar since any rise in the Indian currency against the greenback will make imports costlier. (Edible oils and crude oil, too, turn dearer.)
The rupee hit a record low on Monday before the Reserve Bank of India stepped in but now the market talks of the rupee heading further low. With the Manmohan Singh Government taking its own time to tackle the rupee’s plunge, expect the market to have its own way till then.
If the price rise tends to be alarming, then the buying may not be at expected levels.
Gold prices to remain volatile
Second, the global market no more takes cues from Indian or Asian buying. Or else, how does one explain the fall in gold prices despite buying frenzy in Asia.
This will mean that gold will continue to be volatile until it finds its level, which many see it below $1,100 an ounce.
The view in the market is that every rise in the gold could mean more opportunities for the bear. However, on Monday the views seemed mixed as money managers increased their net-long positions by 9.9 per cent, while bearish bets too rose 1.4 per cent.
Spot, futures gold
By mid-day in Singapore on Tuesday, spot gold ruled higher at $1,251.47 an ounce, while gold futures maturing in August quoted at $1,249.70.
In the domestic market on Monday, gold for jewellery (99.5 per cent purity) dropped a tad to Rs 26,150 for 10 gm and pure gold (99.9 per cent purity) to Rs 26,300.
On MCX, gold August futures could climb up to Rs 26,250.
Indications of US stockpiles dropping again this week is likely to drive crude oil further north on Tuesday. Though there are disturbances to movement of ships in the Suez Canal, the unrest in Egypt is still a cause for concern to the oil markets.
Brent crude oil for delivery in August quoted at $107.05 a barrel and West Texas Intermediate for delivery the same month at $102.95.
Soyabean, crude palm oil
The oils and oilseeds market could be range-bound caught between a dropping dollar and concerns over heavy rainfall in areas where soyabean is grown in the US. The heavy rainfall has led to the talk that US farmers could plant less of the oilseed.
Chicago Board of Trade soyabean futures maturing in November rose to $12.63 a bushel, while crude palm oil contracts to be delivered in September gained at 2,379 ringgit ($742) a tonne.
Wheat, corn prices
In the grains complex, wheat is set to gain on indications that heavy rainfall in the US could affect the crop and China buying over a million tonnes since last week.
In June itself, US wheat exports are seen higher at 1.83 million tonnes against less than 400,000 tonnes a year ago.
Corn (industrial maize) is also likely to gain on sympathy. In Asian trade, wheat contracts for September delivery were up at $6.64, while corn for delivery in December edged above $5 to $5.04 a bushel.
Higher crude oil prices could also prop up natural rubber since its alternative synthetic rubber derived from crude oil will rule high. Heavy rainfall in growing areas in India will also aid the trend.