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Monday, February 15, 2010

Precious metals end lower


Prices manage to garner around 4% weekly gains

Precious metal prices ended lower on Friday, 12 February 2010. An interest rate move by China strengthened the dollar thereby pressuring commodities. Nevertheless, they gained for the week.

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 $1,090 an ounce, lower by $0.41 (0.4%) an ounce on the New York Mercantile Exchange. During intra day trading, it fell to a low of $1,078.1. For the week, gold gained 4%. For January 2010, gold lost 1.2%. Year to date, gold has shed 0.2%.

On Friday, March Comex silver futures ended lower by 14 cents (0.9%) at $15.45 an ounce. For the week, silver ended higher by 4.1%. In January 2010, silver shed 3.9%. Year to date in FY 2010, silver has dropped by almost 5.8%.

In the currency market on Friday, the dollar index, which weighs the strength of dollar against the basket of six other currencies, went up by almost 0.3%. However, the greenback pared some of its gains at the end.

Heavy selling pressure was seen in Asian trade on Friday after the People's Bank of China said it would raise the ratio of reserves banks must set aside by 0.5 of a percentage point, the second such move this year.

Also, the Commerce Department reported on Friday, 12 January 2010, that U.S. businesses cut their inventories for the first time in three months, but strong sales reduced the key inventory-to-sales ratio to below its pre-recession average. Paced by a large drawdown in autos, business inventories fell 0.2% in December. Inventories had risen in
October and November, which had ended a 13-month span of declines. Market was expecting inventories to remain flat.

Precious metal prices started slipping since past couple of weeks due to impending worries from China front where tightening monetary policies are bothering investors due to shaky demand of metals in coming months.

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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