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Gold is likely to head lower in the domestic market after a sharp fall overnight in global exchanges. A weakening dollar that could render the Indian rupee will also boost the trend.
Signs of progress in the US fiscal talks have begun to weaken gold since the dollar could slip in the event of a solution to the crisis that has been dragging for sometime now. A rising rupee, on the other hand, makes imports cheaper, particularly that of commodities such as gold, crude oil and edible oil. These commodities top the import basked as India imports a good quantity of these to meet rising demand.
After having plunged below $1,665-levels overnight, spot gold edged up a bit in early trade in Singapore on Wednesday morning. It was last quoted at $1,675.39 an ounce. Gold February futures contracts ruled at $1,676.90.
On Tuesday, gold for jewellery (99.5% purity) ended higher at Rs 31,515 for 10 gm, while pure gold (99.9 purity) finished at Rs 31,655.
The oils and oilseeds complex could come under heavy pressure from bears after soyabean nosedived on the Chicago Board of Trade (CBOT) overnight. A report by the US Department of Agriculture showed that 4.2 lakh tonnes of exports orders had been cancelled with three lakh tonnes by China alone.
In addition, reports of rain and better soil moisture in Paraguay and Brazil poured more cold water on the complex. Higher palm oil stocks in Indonesia and Malaysia are the other dampening factors.
On CBOT, soyabean for delivery in January declined to $14.66 a bushel, while the most-active crude palm oil March contracts closed lower at 2,336 ringgits ($767) a tonne on Tuesday.
Lower orders for exports and projections of higher carryover stocks are likely to put pressure on wheat and corn (industrial maize). A higher rupee will also act as a deterrent since it will make exports a little uncompetitive.
On CBOT, wheat for delivery in March rose to $8.11 a bushel, while corn for delivery the same month dipped to $7.20 a bushel.
Crude oil is likely to gain on signs of progress in the US fiscal talks. This could also propel natural rubber since its alternative synthetic rubber, derived from crude oil products, is likely to gain.
Brent for delivery in February was up at $108.84 a barrel and NYMEX crude at $87.93.
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