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Global Cues To Keep Domestic Gold Prices Firm

Date 13-February-2014
Subject Global Cues To Keep Domestic Gold Prices Firm

Gold prices on domestic spot and futures market are set to rule firm, taking cues from the global market.Gold seems to have overcome the technical barrier of $1,275 an ounce, while short-covering is also keeping prices firm. Aiding the yellow metal further is US Fed Reserve chief Janet Yellen’s comment that the central bank would be measured in its steps to pare the stimulus programme.

This could mean that the US Fed may not rush through to end the stimulus programme through which money is pumped into the economy by buying bonds and other assets. The stimulus, aimed at boosting the economy, has already seen two cuts this year by $10 billion each in January and February to $65 billion a month.

The trade could get further cues from the US jobless report and weekly retail sales due later in the day.Gold holdings in SPDR Trust, world’s biggest gold backed exchange-traded fund, remained unchanged at 797.85 tonnes.

But all is not glittering for gold as Goldman Sachs in a report overnight said that prices could drop to $1,050 an ounce by the year-end. Depreciation in emerging-market currencies may hurt jewellery demand, it said.

“The path will be more of a slow grind lower over the course of the year unlike last year as markets will wait for strong economic data to confirm that US economic growth is accelerating and that the US Federal Reserve will continue to reduce the accommodative monetary policy,” Goldman Sachs said in the report.

Analysts say gold needs a compelling reason to discourage investors from resorting to profit-booking. In the Indian context, currency movements will also matter as a weak rupee against the dollar makes imports of gold, crude oil and vegetable oils costlier.

By mid-day in Asia, spot gold ruled at $1,291.78 an ounce and gold futures maturing for delivery in April at $1,291.50.Spot gold on NCDEX in the domestic market ended a tad lower at Rs. 30,080 for 10 gm.Gold futures maturing for delivery in April on MCX and NCDEX are likely to rule firm over Rs. 29,000.

Crude oil prices will rule firm with US stockpiles dropping to eight-month low. Forecast of the cold spell continuing in North America is likely to add fuel to rising prices.

Brent crude for delivery in March ruled at $108.61 a barrel and US crude for delivery the same month at $110.08.With Brazil offering soyabean at competitive prices and China switching to the South American bean from US deals, the oils and oilseed market will come under pressure. Profit-booking is also likely in the futures market.

Soyabean on Chicago Board of Trade for delivery in March ruled at $13.27 a bushel. Crude palm oil on Bursa Malaysia Derivatives Exchange opened higher at 2,648 ringgit or $796 a tonne.

While projections of a higher carryover stocks continue to cast shadow on corn (industrial maize), warm US weather is dragging wheat.CBOT wheat for delivery in March ruled lower in Asia at $5.86 a bushel and corn for the same month at $4.39 a bushel.

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