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Monday, February 01, 2010

Bullion metals give up gains


Prices drop as dollar heads up

Precious metal prices ended lower on Friday, 29 January 2010. Prices dropped as the dollar headed up based on strong fourth quarter GDP reading by the Commerce Department. Prices were also 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 Friday, gold for April delivery ended at $1,083.8 an ounce, lower by $1 (0.1%) an ounce on the New York Mercantile Exchange. For the week, gold lost 0.6%. For January 2010, gold lost 1.2%. Hence, year to date in FY 2010, gold prices are lower by 1.2%.

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 Friday, March Comex silver futures ended lower by 2 cents (0.13%) at $16.19 an ounce. For the week, silver ended lower by 4.3%.Year to date in FY 2010, silver has dropped by almost 3.9%.

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 Friday, the dollar index, which weighs the strength of dollar against the basket of six other currencies headed up following stronger than expected fourth quarter GDP reading in the US.

The Commerce Department in US reported on Friday, 29 January 2010 that the U.S. economy grew at the fastest pace in six years during the fourth quarter of 2009, even as consumer spending and business investment remained tepid. As per the report, real gross domestic product increased at a 5.7% seasonally adjusted annual rate in the final three months of the year, the best quarterly growth since late 2003. The economy grew 2.2% in the third quarter. A year ago, the economy fell at a 5.4% pace.

The 5.7% increase in the fourth quarter was in line with the 5.4% gain expected by by market. In the fourth quarter of 2009, about two-thirds of the growth came via the swing in inventories. Excluding the change in inventories, final sales increased at a 2.2% annual rate. But, even with healthy growth in the second half of the year, the economy shrank 2.4% in 2009, the worst year for GDP since the 10.9% drop in 1946.

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.

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