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Thursday, May 21, 2009

Bullion metals rise further

Prices rise to seven week high as dollar index sheds more than 1%

Precious metals ended higher on Wednesday, 20 May, 2009 at Comex. Prices rose today once again following the depressed dollar. A report by World gold council regarding increased demand for gold in first quarter also spurred prices.

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 $10.7 (1.2%) to close at $937.4 an ounce on the New York Mercantile Exchange. It was highest price of gold in last seven weeks. Last week, gold ended higher by 1.8%. Year to date, gold prices are higher by 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 (9%) since then.

On Wednesday, Comex silver futures for July delivery gained 15.5 cents (1.1%) at $14.28 an ounce. Year to date, silver has climbed 26.1% this year. For 2008, silver had lost 24%.

In the currency market on Wednesday, the U.S. dollar index, fell more than 1%. The dollar dropped against euro for the third straight session.

In a report issued today, the World Gold Council reported that gold investment demand in the first quarter more than tripled from a year ago to a record level as investors piled into gold exchange-traded funds to hedge against the global economic downturn.

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 12 (0.08%) at Rs 14,333 per 10 grams. Prices rose to a high of Rs 14,373 per 10 grams and fell to a low of Rs 14,233 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 66 (0.29%) lower at Rs 22,267/Kg. Prices opened at Rs 22,220/kg and fell to a low of Rs 22,206/Kg during the day's trading.

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