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Tuesday, February 02, 2010

Bullion metals add glaze


Prices rise after few consecutive days of slipping

Precious metal prices ended considerably higher on Monday, 01 February 2010. Prices rose due to better than expected economic reports and weak dollar.

Prices were slipping since last couple of days due to impending worries from China front where tightening monetary policies are bothering investors due to shaky demand of metals in coming months.

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 April delivery ended at $1,105 an ounce, higher by $21.2 (1.9%) an ounce on the New York Mercantile Exchange. Last week, gold lost 0.6%. For January 2010, gold lost 1.2%. Year to date, gold has gained 0.7%.

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 Monday, March Comex silver futures ended higher by 47 cents (2.9%) at $16.66 an ounce. Last week, silver ended lower by 4.3%. In January 2010, silver shed 3.9%. Year to date in FY 2010, silver has dropped by almost 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.

Among economic data expected for the day, The Institute for Supply Management in US reported on Monday, 01 February 2010, that its index rose to 58.4 in January 2010 from 54.9 in December 2009. A figure of 56 was expected by market. It is the highest reading since August 2004.

Readings over 50% in the ISM diffusion index indicate that more firms are growing than contracting. The report indicated that nation's manufacturing firms were growing at a very strong pace in January 2010.

But enthusiasm over the report was a bit tempered by a steeper-than-expected 1.2% drop in construction spending during December. Separately, personal income during December was up 0.4% in a slightly sharper increase than had been expected, but spending during December increased at a softer-than-expected pace of 0.2%. Core personal consumption expenditures increased just 0.1% month-over-month, but that was in-line with expectations.

In the currency market on Monday, the dollar index, which weighs the strength of dollar against the basket of six other currencies fell by almost 0.2%.

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 April delivery closed higher by Rs 303 (1.85%) at Rs 16,620 per ten grams. Prices rose to a high of Rs 16,661 per 10 grams and fell to a low of Rs 16,291 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 568 (2.22%) higher at Rs 26,068/Kg. Prices opened at Rs 25,560/kg and rose to a high of Rs 26,117/Kg during the day's trading.

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