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Tuesday, August 18, 2009

Strong dollar hammers precious metal prices

Gold ends modestly lower while silver plunges

Precious metal prices fell on Monday, 17 August, 2009. Prices fell as dollar strengthened following a huge sell off in international equity market overnight. The Chinese market led the pack of decliners.

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 Monday, gold for December delivery ended at $935.8, lower by $12.9 (1.3%) an ounce on the New York Mercantile Exchange. Last week, gold ended lower by almost 1.1%. After four consecutive weekly gains, this was yellow metal's first weekly drop. Year to date, gold prices are higher by 5.4%.

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 (9%) since then.

On Monday, Comex silver futures for September delivery lost 74.7 cents (5%) to $13.975 an ounce. Last week, silver ended higher by 0.23%.

Silver ended 2.7% higher for July, 2009. For second quarter, silver rose 4.5%. Year to date, silver has climbed 25.5% this year. For 2008, silver had lost 24%.

In the currency market on Monday, the dollar index which weighs the value of dollar against a basket of six other currencies, rose by 0.4%.

Triggering a broad retreat in global stocks, Shanghai stocks fell 5.8% yesterday, their biggest drop this year, after persistent worries over Beijing's moves to cool economic growth added to investor caution.

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 lower by Rs 18 (0.12%) at Rs 14,877 per 10 grams. Prices rose to a high of Rs 14,900 per 10 grams and fell to a low of Rs 14,811 per 10 grams during the day's trading.

At the MCX, silver prices for September delivery closed Rs 635 (2.7%) lower at Rs 23,079/Kg. Prices opened at Rs 23,680/kg and fell to a low of Rs 22,820/Kg during the day's trading.

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