Strong dollar takes some shine off precious metals
Bullion metal prices ended lower on Friday, 27 March, 2009. The strong dollar was the main reason for precious metals ending lower on that day.
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 Friday, Comex Gold for April delivery fell $16.7 (1.8%) to close at $923.2 an ounce on the New York Mercantile Exchange. For the week, gold ended lower by 3.5%. 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%.
On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped somewhat (7.9%) since then.
On Friday, Comex silver futures for May delivery fell 35.7 cents (2.6%) to end at $13.263 an ounce. In February, 2009, silver had rose 4.3% after climbing 14% in January. Year to date, silver has climbed 21.7% this year. For 2008, silver had lost 24%.
In the currency market on Friday, the dollar moved higher against most major rivals as a budget warning from Germany's finance minister pressured the euro.
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%.
