Gold and silver drop due to rebounding dollar
Bullion metal prices ended lower on Tuesday, 24 March, 2009. The rebounding dollar was responsible for precious metals ending lower 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 Monday, Comex Gold for April delivery fell $28.7 (3%) to close at $923.8 an ounce on the New York Mercantile Exchange. Last week, the yellow metal ended higher by 2.8%. 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 12.1%.
On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped somewhat (7.9%) since then.
On Tuesday, Comex silver futures for May delivery fell 51 cents (3.7%) to end at $13.357 an ounce. In February, 2009, silver had rose 4.3% after climbing 14% in January. Year to date, silver has climbed 22.6% this year. For 2008, silver had lost 24%.
In the currency market today, the dollar strengthened against its rivals. The dollar index, which measures the strength of the dollar against a basket of six currencies rose 0.3%.
Yesterday, 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 today 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. The move had boosted investor confidence and the same took precious metals little higher yesterday.
In 2008, gold prices ended higher by 5.5%. The dollar index had gained 12% that year.
