Gold prices in the domestic spot and futures market could rule firm with Janet Yellen, tipped to be the next US Federal Reserve Chief, backing continuation of the stimulus package till the economy performs to its potential.

Yellen, who will depose before the US Senate Banking Committee later this evening for the Fed Chair, said that the economy and labour market are performing below their potential.

Fed stimulus to continue

The market sees this as a signal that the $85-billion-a-month programme to buy bonds and pump more money in the economy will continue for some more time. US President Barack Obama is backing Yellen to succeed the current Fed Chief Ben Bernanke.

The statement lifted currencies in Asia and it is also likely to help prop up the rupee, which was talked up by RBI Government Raghuram Rajan last evening.

Key factors driving gold

If the rupee rises, then the rise in prices will be curbed since a strong Indian currency against the dollar makes import of gold, crude oil and vegetable oils costlier.

The other factor pushing up gold is demand from China, where volumes on the Shanghai exchange were near a month’s high on Wednesday.

A bearish factor could be paring of holdings in gold in exchange-traded funds. SPDR Trust, the world’s biggest gold exchange-traded funds, reported that the holdings fell to 865.71 tonnes.

Spot gold, gold futures

In early Asian trade, spot gold was up at $1,284.12 an ounce and gold futures maturing in December at $1,283.20.

Data on preliminary GDP in Europe, US weekly job claims and US trade are likely to provide further cues later in the day.

Crude oil prices

The rise in crude oil prices late last evening was short-lived, following uncertainty over Libyan supplies, as the increase in US stockpiles for the seventh consecutive week proved to be a drag.

Brent crude contracts maturing in December fell to $107.30 a barrel and US crude to $93.81.

The oils and oilseeds market is likely to rule firm with China coming up with another deal to buy nearly 1.25 lakh tonnes of soyabean from the US.

Profit-booking seen

However, the market is turning a little uneasy and could see some profit-booking since any improvement in crop prospects in Argentina and Brazil could lead to China switching over its deal to South America.

China is likely to import nearly six million tonnes of soyabean this year.

According to Dorab Mistry, Director of Godrej International, palm oil prices are likely to rule above 2,400 ringgit ($752) a tonne on lower than the expected production in Malaysia and rising bio-fuel consumption.

Chicago Board of Trade soyabean January contracts dropped to $13.08 a bushel. Crude palm oil January contracts were offered at 2,604 ringgit or $816.30 a tonne.

Corn, wheat prices

Corn (industrial maize) prices could come under pressure on increased indications of high ending-stocks and the US Environmental agency cutting the norms for ethanol blending.

Wheat is likely to rule steady on Egypt floating an import tender but the outlook could turn bearish on better prospects for winter crop.

Wheat futures maturing in December on CBOT were up at $6.47 a bushel and corn futures for the same month fell to $4.29 a bushel.

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