Prices rise due to subdued dollar
Precious metals ended higher on Tuesday, 19 May, 2009 at Comex. Prices rose today following the depressed dollar. The dollar was subdued today on reports that a few bailed out banks are moving ahead in paying off the bailout money to the government partly.
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 gained $5 (0.5%) to close at $926.7 an ounce on the New York Mercantile Exchange. Last week, gold ended higher by 1.8%. Year to date, gold prices are higher by 6.8%.
For the month of April, gold had lost 3.7%, the second consecutive monthly drop. 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 (10.4%) since then.
On Tuesday, Comex silver futures for July delivery gained 29.5 cents (2.1%) at $14.125 an ounce. Year to date, silver has climbed 25% this year. For 2008, silver had lost 24%.
In the currency market on Tuesday, the U.S. dollar index, fell 0.1%. The index, which tracks the greenback against a trade-weighted basket of six major currency rivals including the euro and yen, has fallen nearly 3% so far this month, furthering the allure of gold as an investment vehicle.
Among economic reports scheduled for the day, The Commerce Department in US reported on Tuesday, 19 May, 2009 that construction on new housing projects slowed to a record-low pace in April. New construction of single-family homes and apartments plunged 12.8% from March 2009 to a record-low annual rate of 458,000. On a yearly basis, it was 54.2% below the revised April 2008 rate of 1,001,000.
This is the weakest level since the government began publishing the series in 1959. Starts are now 79.9% below their peak in January 2006. The report detailed that the drop was caused by a slump in construction of multifamily housing, which fell 46.1% to a record low 78,000. This was the biggest drop since January 1994.
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 115 (0.8%) at Rs 14,321 per 10 grams. Prices rose to a high of Rs 14,333 per 10 grams and fell to a low of Rs 14,121 per 10 grams during the day's trading.
At the MCX, silver prices for July delivery closed Rs 577 (2.7%) higher at Rs 22,333/Kg. Prices opened at Rs 21,783/kg and rose to a high of Rs 22,385/Kg during the day's trading.
