Weak economic reports help precious metals shine
Bullion metal prices ended higher on Thursday, 26 March, 2009. Gloomy economic data was responsible for precious metals ending higher today.
Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa.
On Thursday, Comex Gold for April delivery rose $4.2 (0.4 %) to close at $940 an ounce on the New York Mercantile Exchange. For the month of February, gold ended higher by 7.4%. For January, 2009, gold had gained 3.9%. Year to date, gold prices are higher by 13.8%.
On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped somewhat (7.9%) since then.
On Thursday, Comex silver futures for May delivery rose 18.3 cents (1.4%) to end at $13.62 an ounce. In February, 2009, silver had rose 4.3% after climbing 14% in January. Year to date, silver has climbed 24.3% this year. For 2008, silver had lost 24%.
The Labor Department reported on Thursday, 26 March, 2009 that the number of people collecting state unemployment benefits reached yet another new record last week, jumping 122,000 to a seasonally adjusted 5.56 million.
In a separate report, the Commerce Department reported on Thursday 26 March, 2009 that in its third estimate of quarterly growth, the U.S. economy experienced its most violent contraction during the fourth quarter, with real gross domestic product plunging at a 6.3% annualized seasonally adjusted rate.
Earlier this week, the Treasury Department had unveiled their plan about buying back most of the bank's toxic assets thereby cleaning up their balance sheet to the extent possible. Treasure Secretary Tim Geithner detailed that the Treasury plans to create a series of public-private investments funds to buy $500 billion to $1000 billion in legacy loans and securities. To encourage participation from the private sector, the government is taking on much of the risk and offering subsidies.
In 2008, gold prices ended higher by 5.5%. The dollar index had gained 12% that year.
Last year, the weakening dollar and higher global demand for raw materials had led to records for commodities including gold. Gold reached a record in March 2008 as a U.S. housing slump and credit crisis spurred the Federal Reserve to slash borrowing costs. In the last move, the Federal Reserve has cuts its target bank lending rate to 0.25% from 5.25% in September, 2007. The Fed did it in nine steps.
Prior to 2008, gold had witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Silver had climbed 16% in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.
At the MCX, gold prices for April delivery closed higher by Rs 12 (0.07%) at Rs 15,238 per 10 grams. Prices rose to a high of Rs 15,351 per 10 grams and fell to a low of Rs 15,167 per 10 grams during the day's trading.
At the MCX, silver prices for May delivery closed Rs 139 (0.6%) higher at Rs 22,490/Kg. Prices opened at Rs 22,291/kg and rose to a high of Rs 22,665/Kg during the day's trading.
