Gold is set to advance in the domestic market on Wednesday following a rise in the global market. The yellow metal continued to rise since investors are looking for an asset that can derive them value. This is because more easy money policies are expected to stimulate the economy of the developed nations, particularly the US and Europe.
Easy money policy means lower interest rates, which obviously puts off investors and forces them to look for investments from which they can get better returns. Gold is seen as an asset that doesn’t get devalued by currency movements and hence the craze for the yellow metal.
In early trade at Singapore, spot gold quoted higher at $1,681.95, while gold futures for delivery in February ruled at $1,681.60.
In the domestic market on Tuesday, gold for jewellery (99.5% purity) closed at Rs 30,540 for 10 gm and pure gold (99.9 % purity) at Rs 30,690.
The currency movements are likely to influence in a small way only since the movement has been higher. Still, the dollar was lower against the yen and euro in early trade. A strong dollar will make imports of commodities such as gold, crude oil and vegetable oils costlier, while making exports competitive.
US Department of Agriculture reports inventory drop
The oils and oilseeds complex could see volatility with the US Department of Agriculture reporting a 17 per cent fall in soyabean stocks playing in the mind of the trade. However, the record stocks of Malaysia palm oil could negate or curb gains. Drought in the US Midwest last year, the worst in the last eight decades, dragged soyabean production three per cent. The effects of the drought are still being felt in those areas. In fact, it cooled soyabean on the Chicago Board of Trade (CBOT) overnight.
On CBOT, soyabean for delivery in March slid to $14.13 a bushel. On the Bursa Malaysia Derivatives Exchange, crude palm oil March contracts finished higher at 2,397 ringgit ($796) a tonne on Tuesday.
The US Department of Agriculture has also reported a 17 per cent drop in corn (industrial maize) inventories besides a 13 per cent fall in production last year. This helped corn to rise to $7.30 a bushel on CBOT. Expect it to head north on Wednesday, too.
Concerns over US wheat have cropped up following fears that the winter crop there could be hit due to lack of soil moisture. This could indirectly buoy prices in other exporting nations, including India.
On CBOT, wheat was up at 7.82 a bushel for delivery in March.
Crude oil, on the other hand, may cool as the US reported higher stockpiles perhaps indicating lower production by industrial units.
Brent futures for delivery in March slipped to $109.63, while NYMEX crude February contracts closed at $93.44 a barrel.
This should see natural rubber range-bound.