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Thursday, June 18, 2009

Precious metals reverse earlier losses

Gold and silver rise due to consumer price report

Precious metal gave up earlier losses and rose modestly higher on Wednesday, 17 June, 2009. They rose as the dollar weakened in the wake of consumer price index report in the US thereby increasing the appeal of precious metals as a hedge against inflation.

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, gold for August delivery ended at $936, higher by $3.8 (0.4%) an ounce on the New York Mercantile Exchange. Last week, gold ended higher by 2.3%. Year to date, gold prices are higher by 8%.

Gold had ended the month of May higher by 9.8%. It was the highest monthly gain registered by gold in six months. Before this, gold had suffered losses in prior two months. For the month of April and March, 2009, gold had lost 3.7% and 2.1% respectively. But the metal gained 4.3% in the first quarter of this year.

On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped somewhat (10%) since then.

On Wednesday, Comex silver futures for July delivery rose 15 cents (1.1%) at $14.28 an ounce. Last week, silver ended lower by 3.3%. For the month of May, silver gained 26.6%. It was the biggest monthly gain for silver in more than two decades. Year to date, silver has climbed 29.8% this year. For 2008, silver had lost 24%.

The Labor Department reported on Wednesday, 17 June, 2009 that total CPI and core CPI increased 0.1%. Total CPI was a bit below expectations, but core CPI was in-line the consensus. U.S. consumer price index fell 1.3% in the past year, the sharpest decline since April 1950.

In 2008, gold prices ended higher by 5.5%. The dollar index had gained 12% that year.

At the MCX, gold prices for August delivery closed higher by Rs 70 (0.48%) at Rs 14,510 per 10 grams. Prices rose to a high of Rs 14,550 per 10 grams and fell to a low of Rs 14,450 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed Rs 163 (0.72%) higher at Rs 22,732/Kg. Prices opened at Rs 22,605/kg and rose to a high of Rs 22,790/Kg during the day's trading.

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