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Friday, January 22, 2010

Bullion metals turn duller

Prices drop as dollar rises to five month high against euro

Precious metal prices continued to shed glaze on Thursday, 21 January 2010. Prices fell as the dollar headed up strongly and the same rose to five month high against the euro.

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 Thursday, gold for February delivery ended at $1,103.2 an ounce, lower by $9.4 (0.8%) an ounce on the New York Mercantile Exchange. Earlier during the day, it fell to a low of $1,088. Last week, it ended higher by 0.4%. Year to date in FY 2010, gold has risen by almost 0.9%.

Last year, after hitting a low at $807.30 per ounce on 15 January 2009, gold futures rallied almost 51% to hit an all-time high at $1217.40 per ounce during early December of 2009 but fell from those levels at the end.

On Thursday, March Comex silver futures ended lower by 37 cents (2.1%) at $17.51 an ounce. Last week, silver ended higher by 0.5%. Year to date in FY 2010, silver has risen by almost 5.1%.

Silver futures had hit a low at $10.42 on 15 January 2009 and hit a high at $19.30 per ounce on 2 December 2009. Like gold, silver also ended lower than its all time high level.

In the currency market on Thursday, the dollar index, which weighs the strength of dollar against the basket of six other currencies rose on concerns that Greece and other countries might have problems repaying their loans. Thedollar also strengthened on fears that China will curb bank lending. The China Banking Regulatory Commission said it hasn't "specifically" told banks to suspend lending in January, but a report said that it had asked several banks to stop issuing loans.

Among economic reports expected for the day, the Conference Board in US reported on Thursday, 21 January 2010 that leading U.S. economic indicators increased 1.1% in December 2009. Also, the Philadelphia Fed said its manufacturing index slipped to 15.2 in January from 22.5 in December. The index showed shipments, new orders, and employment expanded in factories in the region, but at a slower pace than in December.

Gold had ended FY 2009 higher by 24%. Silver futures had ended 2009 up 50%. The dollar index had lost 4.2% against its counterparts last year.

At the MCX, gold prices for February delivery closed lower by Rs 151 (0.9%) at Rs 16,529 per ten grams. Prices rose to a high of Rs 16,690 per 10 grams and fell to a low of Rs 16,365 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 522 (1.9%) lower at Rs 27,247/Kg. Prices opened at Rs 27,853/kg and fell to a low of Rs 27,055/Kg during the day's trading.
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