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Thursday, September 24, 2009

Precious metals slip again

Gold & Silver drop again after Federal Reserve's decision

Precious metal prices slipped once again on Wednesday, 23 September, 2009. Prices fell today after Federal Reserve decided to keep interest rates unchanged.

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 $1014.4, lower by $1.1 (0.1%) an ounce on the New York Mercantile Exchange. Last week, gold ended higher by 0.4%. Year to date, gold prices are higher by 15%.

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 (2.8%) since then.

On Wednesday, Comex silver futures for December delivery fell 20.5 cents (1.2%) to $16.91 an ounce. Last week, silver ended higher by 2.2%.

Silver ended 7.1% higher for August, 2009. For second quarter, silver rose 4.5%. Year to date, silver has climbed 48.8% this year. For 2008, silver had lost 24%.

In the currency market on Wednesday, the dollar index, which measures the strength of dollar against a basket of other currencies, fell by almost 0.2%.

In a statement released after a two-day policy meeting, the Fed kept its target for its federal funds rate set at a range of zero to 0.25%. It also announced that it has extended its purchase of mortgage-backed securities and agency debt into the first quarter of 2010 from December. In the statement, Fed officials said that economic activity has picked up with improved conditions in financial markets. Lower interest rates tend to hurt the dollar and boost gold's value as a hedge against a weak currency and inflation.

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 21 (0.13%) at Rs 15,837 per 10 grams. Prices rose to a high of Rs 15,885 per 10 grams and fell to a low of Rs 15,746 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed Rs 73 (0.3%) lower at Rs 27,137/Kg. Prices opened at Rs 27,299/kg and fell to a low of Rs 26,752/Kg during the day's trading.

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