Gold and silver prices end higher as IMF lowers world economic growth forecast
Bullion metals ended higher on Wednesday, 22 April, 2009. IMF predicting that the world economy will shrink this year increased the appeal of precious metals as an alternate source of investment. Disappointing batch of economic reports also added to this.
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 Wednesday, Comex Gold for June delivery gained $9.8 (1.1%) to close at $892.5 an ounce on the New York Mercantile Exchange. Last week, gold ended lower by 1.7%. 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 Wednesday, Comex silver futures for May delivery gained 24.5 cents (2%) at $12.305 an ounce. Year to date, silver has climbed 8.2% this year. For 2008, silver had lost 24%.
The IMF forecast today 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.
Earning reports dominated today. Larger-than-expected Q1 loss at Morgan Stanley at $578 million, was worse than the consensus estimate. Wells Fargo, however, reported slightly better earnings than its 9 April preannouncement. Much of the day's volatility has mirrored the financial sector.
In other notable earnings news, Boeing and Capital One missed estimates. In positive earnings news, AT&T, McDonald's and Yahoo! topped estimates.
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 higher by Rs 138 (0.96%) at Rs 14,431 per 10 grams. Prices rose to a high of Rs 14,470 per 10 grams and fell to a low of Rs 14,285 per 10 grams during the day's trading.
At the MCX, silver prices for May delivery closed Rs 395 (1.9%) higher at Rs 20,564/Kg. Prices opened at Rs 20,119/kg and rose to a high of Rs 20,607/Kg during the day's trading.
