Swine flu concerns take precious metals lower
Precious metals (gold and silver) ended lower on Tuesday, 28 April, 2009. They traded in the red for the entire session. Prices fell as worries about the current swine flu swept across the world 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 Tuesday, Comex Gold for June delivery lost $14.6 (1.6%) to close at $893.6 an ounce on the New York Mercantile Exchange. Last week, gold ended higher by 5.3%. Year to date, gold prices are higher by 0.9%.
For the month of March, gold fell 2.1%, down for the first month in five. But the metal gained 4.3% in the first quarter. Before March, for the month of February, gold ended higher by 7.4%. For January, 2009, gold had gained 3.9%.
On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped somewhat (15%) since then.
On Tuesday, Comex silver futures for May delivery lost 55.5 cents (4.3%) at $12.4 an ounce. Year to date, silver has climbed 9.2% this year. For 2008, silver had lost 24%.
The deadly swine-flu outbreak, originated in Mexico, has fueled fears of a repeat of the SARS epidemic that had ravaged Asia. In Mexico, more than 1,641 people have contracted the swine flu and 103 people have died. The World Health Organization raised its swine-flu threat level on Tuesday, which now stands just two steps short of a full pandemic. The WHO also said it was now too late to contain the virus.
The IMF forecast earlier during the month a 1.3% decline in the world economy, compared with a 0.5% expansion estimated in January, and said growth will be slower next year than previously expected. As per the report, the UK will see its economy shrink by 4.1%, Japan by 6.2%, and the U.S. economy is expected to decline by 2.8%
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 June delivery closed lower by Rs 195 (1.3%) at Rs 14,515 per 10 grams. Prices rose to a high of Rs 14,691 per 10 grams and fell to a low of Rs 14,459 per 10 grams during the day's trading.
At the MCX, silver prices for May delivery closed Rs 580 (2.7%) lower at Rs 20,879/Kg. Prices opened at Rs 21,270/kg and fell to a low of Rs 20,737/Kg during the day's trading.
