Gold prices on the domestic spot and futures market could search for direction as talks to end the US Government shutdown prolongs.

Though some progress has been reported in the talks, there were no clear signals that the shutdown will come to an end immediately.

The US Senate will meet later in the day to decide on the debt limit. However, if no debt ceiling is fixed and a solution eludes the lawmakers, then the US could begin to default on payments between October 22 and 31.

US consumer confidence

The shutdown has impacted consumer confidence in the US, dropping to a nine-month low.

Investors, on the other hand, seem to be cashing out of gold with holdings in exchange-traded funds continuing to drop. Holdings in SPDR Trust, the world’s biggest, are down to 890.98 tonnes.

Factors driving gold

In the domestic sector, gold gained on Saturday mainly owing to festival buying. There is a section of population in the country that believes buying gold during Vijayadasami brings good luck and the market has gone just by that sentiment. Since prices movements were against the global trend, it remains to be seen how much gold can gain on Monday.

One factor going in favour of gold as the year-end nears is that there are quite a number of auspicious days for marriages besides Diwali, the occasion for purchases.

The ongoing kharif harvest can also encourage buying of gold in rural areas but it is a factor that will have to be watched closely. It is unlikely that there will be heavy buying if prices are to rule above Rs 30,000 for 10 gm.

Spot gold, gold futures

In early Asian trade, spot gold in Singapore was up at $1,270.19 an ounce. Gold futures, to be delivered in December, ruled at $1,270.

In the domestic market on Saturday, gold for jewellery (99.5 per cent purity) closed higher at Rs 30,245 and pure gold (99.9 per cent purity) at Rs 30,395.

Currency movements will also have a say in gold prices since a stronger rupee against the dollar makes import of gold, vegetable oils and crude oil cheaper.

Crude oil prices

The US shutdown is likely to cast its shadow on crude oil prices too on fears that demand could be affected. Besides, the global energy body’s report of rising supplies could dampen the counter.

Brent crude contracts maturing in November slipped to $111.27 a barrel and US crude contracts for the same month to $101.85.

Soyabean acreage

The oils and oilseeds complex could come under pressure on bets that a forecast by the US Department of Agriculture later tonight could show higher soyabean yield.

Fears were expressed that adverse weather in August and September could affect the standing crop but they seem to have been allayed. The main concern now is how the crop will fare in South America, particularly Argentina, but no clears signs are likely to emerge until December.

A lower than forecast palm oil stocks will, however, still provide cushion. In India, rains in key soyabean area are causing concern. A clear picture should be available in the next couple of days.

Soyabean, crude palm oil

In early Asian trade, soyabean on the Chicago Board of Trade electronic trading for delivery in November ruled at $12.73 a bushel. Crude palm oil on Bursa Malaysia Derivatives Exchange opened higher at 2,381 ringgit or $748 a tonne.

The grain complex is likely to be mixed with corn under pressure and wheat gaining.

Corn, wheat prices

Corn (industrial maize) could face pressure on bets of higher US production and the environment protection agency there pegging 13 billion gallons as target for mixing ethanol against 14.4 billion this year.

Wheat is seen firm on demand from China and reports of plantings being affected in the Black Sea region.

CBOT corn for delivery in December ruled at $4.33 a bushel in early Asian trade and wheat contracts for the same month at $6.95 a bushel.

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