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Thursday, August 13, 2009

Precious metals end higher

Gold and silver gain as Fed keeps interest rates at record low

Yellow metal prices rose on Wednesday, 12 August, 2009. Prices fell as the Fed decided to keep interest rates at record low at its Federal Open Market Committee meeting. Silver prices also gained.

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 December delivery ended at $952.5, higher by $4.90 (0.5%) an ounce on the New York Mercantile Exchange. But gold prices fell during after-hours electronic trading. Last week, gold ended higher by almost 0.4%. Year to date, gold prices are higher by 7.1%.

Gold ended July, 2009 higher by 2.8%. Before this, for the second quarter, gold ended higher by 0.5%. The metal had 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 (11.7%) since then.

On Thursday, Comex silver futures for September delivery gained 24 cents (1.7%) to $14.585 an ounce. Last week, silver ended higher by 5.2%.

Silver ended 2.7% higher for July, 2009. For second quarter, silver rose 4.5%. Year to date, silver has climbed 29.6% this year. For 2008, silver had lost 24%.

The FOMC left its target range for the fed funds rate unchanged at 0.00% to 0.25% and will keep the interest rate at exceptionally low levels for an extended period. That was expected, though. FOMC expects inflation to remain subdued for some time and economic activity is likely to remain weak for some time. The FOMC did say sluggish income growth will constrain household spending, though members hold the belief that economic activity is leveling out.

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

At the MCX, gold prices for October delivery closed higher by Rs 53 (0.36%) at Rs 14,860 per 10 grams. Prices rose to a high of Rs 14,888 per 10 grams and fell to a low of Rs 14,806 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 282 (1.2%) higher at Rs 23,399/Kg. Prices opened at Rs 23,132/kg and rose to a high of Rs 23,425/Kg during the day's trading.

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