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Thursday, December 02, 2010

Precious metals add modest gains

Gains remain restricted due to strong economic data 

Precious metals ended with modest gains on Wednesday, 01 December 2010 at Comex. 

Prices rose as the dollar weakened. But the gains were restricted due to stronger than expected set of economic data which decreased the appeal of precious metals as an alternate investment. 

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. But bullion metals have registered increase in prices despite strong dollar in recent times and vice versa. 

On Wednesday, gold for December delivery ended at $1,388.3 an ounce, higher by $2.2 (0.2%) on the New York Mercantile Exchange. 

Gold has surged to record high of $1,410 in early November. Prices had been on a roll since late August on expectations that Federal Reserve efforts at monetary stimulus will depress the dollar, making gold more valuable as an alternative store of wealth. 

Gold ended the month of November higher by 2.1%. It had ended October 2010 higher by 3.8%. Before this, it ended September 2010 and the third quarter higher by 5%. It was eighth consecutive quarterly gain for gold. For the second quarter, gold ended up by 12%. For the first quarter of this year, gold rose by 1.7%. On a year to date basis, gold is higher by 26.6%. 

On Wednesday, December Comex silver futures ended higher by $0.20 (0.7%) at $28.431. Prices gained 15% in November. Silver has hit a string of 30-year highs in recent months, peaking at $28.91 on 9 November. 

Before this, for the month of October, silver gained 13%, its third consecutive monthly gain. In September, silver ended higher by 12%. For the third quarter, silver gained nearly 18%. 

For the second quarter, silver ended higher by 3.1%. For the first quarter of this year, silver rose by 3%. On a year to date basis, silver is higher by 61.7%. 

In the currency market on Wednesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies fell 0.5%. 

Among economic data expected for the day, the ISM Manufacturing Index for November eased to 56.6 after a reading of 56.9 in the prior month, but that was still in stride with the expected reading of 56.5. Construction spending in October increased 0.7%, just as it did the month before as against a 0.5% decline. 

Separately, the Labor Department revised its third-quarter productivity estimate on nonfarm U.S. businesses, saying it rose at a 2.3% annual rate in the quarter, up from the 1.9% estimate offered a month ago. 

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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