In ordinary circumstances, gold prices on the domestic spot and futures markets should drop on Thursday. But these are extraordinary times and we are seeing strange developments that sometimes defy fundamentals.

Overnight, the US Federal Reserves minutes revealed what the market has been looking to — the US will begin paring its $85-billion-a-month stimulus programme, probably from next month.

This morning, data show that China’s factory output improved after a slowdown in the last two quarters.

Spot gold, gold futures

These are indications enough to drag the gold as it happened in the global markets. In early trade in Asia, spot gold slipped to $1,363.30 an ounce and gold futures maturing in December to $1,362.90.

Other bearish indications come from waning investor interest. Holdings in world’s largest gold exchange-trade fund, SPDR Trust, dropped to 913.52 tonnes.

All these in the normal course should see gold drop here.

Rupee Vs dollar

But with the rupee being pounded mercilessly, the currency market holds the key. Any drop in the rupee against the dollar makes import of crude oil, gold and vegetable oils costlier. This is the reason why gold has been rising in India despite sideways movement in the global market.

In the domestic market on Wednesday, gold for jewellery (99.5 per cent purity) ended higher at Rs 31,440 for 10 gm mainly on this count. Pure gold (99.9 per cent purity) rose to Rs 31,585.

On MCX, October gold contracts could trade in the Rs 30,000 to Rs 31,500 range.

Brent crude

Indications of end to the US stimulus programme are set to drag crude oil prices on speculation that this could cut demand. Still, political developments in West Asia and North Africa will have some bearing.

In early trade, Brent for October settlement fell to $109.60 a barrel and West Texas Intermediate contracts for the same month to $103.81.

The oils and oilseeds complex could search for direction after a volatile session in soyabean last night.

Soyabean contracts rose initially on concerns that dry weather could affect the yield and threats of frost around. But it dropped on reports that a tour by the US professional farmers found the crop in a better shape.

Hopes of higher oilseeds production in India are also weighing in on the market as also the rupee movement.

Soyabean, crude palm oil

Chicago Board of Trade soyabean contracts maturing in November quoted at $12.97 a bushel. Crude palm oil November futures on Bursa Malaysia Derviatives Exhange opened higher at 2,342 ringgit or $711.53 a tonne.

The grains complex could come under pressure as the farmers tour of the US Mid-west showed higher corn (industrial maize) harvest this year compared with last year. This made fears over weather outlook take a back seat.

CBOT corn fell to $4.79 a bushel. Wheat is also set to rule quite with contracts maturing in December flat at $6.48 a bushel.

Related Topics