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Thursday, September 17, 2009

Precious metals glitter

Prices rise as dollar drops to one year low

Precious metal prices rose on Wednesday, 16 September, 2009. Prices rose in anticipation that global economic recovery is on way. The slipping dollar also heightened the appeal of precious metals as an alternate source of investment.

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 $1020.2, higher by $13.9 (1.4%) an ounce on the New York Mercantile Exchange. During intra day trading, it rose to a high of $1,023.3. Last week, gold ended higher by 1%. Year to date, gold prices are higher by 16.4%.

Gold ended August, 2009 higher by 0.2%. 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 (2.5%) since then.

On Wednesday, Comex silver futures for December delivery rose 43 cents (2.5%) to $17.23 an ounce. Last week, silver ended higher by 2.5%.

Silver ended 7.1% higher for August, 2009. For second quarter, silver rose 4.5%. Year to date, silver has climbed 48.7% this year. For 2008, silver had lost 24%.

The dollar, which has served as a safe-haven asset over the past year because of its low yield, fell back to its lows of the year on Wednesday, after more upbeat U.S. economic reports. The dollar index, which measures the strength of dollar against a basket of other currencies, fell to one year low of 76.15.

The Federal Reserve reported on Wednesday, 16 September, 2009 that USA's factories showed renewed strength in August and the gain in July was much stronger than first thought. U.S. industrial production rose 0.8% in August. Output rose a revised 1% in July, double the initial estimate of a 0.5% gain. The gain in July is the largest since October 2008.

In a separate report, The Labor Department reported on Thursday, 16 September, 2009 that U.S. consumer prices increased a seasonally adjusted 0.4% in August, pushed higher by a 9.1% increase in gasoline prices. In the past 12 months, the consumer price index has fallen 1.5%, largely because energy prices have dropped 23% over that period.

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 31 (0.19%) at Rs 15,908 per 10 grams. Prices rose to a high of Rs 16,009 per 10 grams and fell to a low of Rs 15,871 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed Rs 349 (1.3%) higher at Rs 27,622/Kg. Prices opened at Rs 27,366/kg and rose to a high of Rs 27,792/Kg during the day's trading.

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