Gold ends marginally lower as dollar strengthens but silver gains as copper rallies
Precious metals ended mixed today after dollar gains capped gold’s rise in prices. Gold prices fell today but silver prices rose today, Wednesday, 19 December, 2007. The dollar strengthened today even as US stocks slumped. Gold generally moves in the opposite direction of the U.S. currency. Gold, as a dollar-denominated commodity, suffers from dollar strength.
Comex Gold for February delivery fell $2 (0.2%) to close at $805.4 an ounce on the New York Mercantile Exchange today. Earlier the price fell to almost $802.2/ounce. Last week, prices rose by almost 0.3% ($2.2/ounce). On, 7 November, prices had touched $848/ounce. It was the highest price after a record $873 on 21 January, 1980.
Comex Silver futures for March delivery rose 5.7 cents (0.5%) to $14.222 an ounce. Silver prices climbed up as copper rallied by more than 3% today. Prices touched 26 year high on 7 November, after reaching $16.275. The metal has climbed 10% this year.
Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices. Rising crude increases inflationary pressures and vice versa. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.
In the currency market today, the dollar index, which tracks the performance of the greenback against a basket of other major currencies, gained 0.3% at 77.605.
In the energy market, oil prices rose for the first time in five sessions and ended $1.16/barrel higher at $91.24/barrel. Prices increased today after Energy Department reported more than expected slump in crude inventories for week ended 14 December.
Gold had climbed 25.8% this year till date as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Dollar is still 8.3% down against the euro this year.
In 2006, silver had jumped 46% while gold gained 23%.
Last week on 11 December, Federal Reserve lowered the federal funds rate by a quarter-point to 4.25%. The Fed also lowered its discount rate, the interest it charges on direct loans it makes to banks, by a quarter-point to 4.75%.
Dollar had been witnessing a free fall since Federal Reserve cut interest rates in September. Before 11 December, Federal Reserve had cut the fed funds rate by a quarter-point to 4.50% on 31 October, 2007. Prior to that, Federal Reserve had cut interest rates by half percentage point on 19 September, 2007.
At the MCX, gold prices for February delivery closed lower by Rs 5 (0.05%) at Rs 10,257 per 10 grams. Prices rose to a high of Rs 10,300 per 10 grams and fell to a low of Rs 10,222 per 10 grams during the day’s trading.
At the MCX, silver prices for March delivery closed Rs 67 (0.4%) higher at Rs 18,759/Kg. Prices opened at Rs 18,702/kg and went to a high of Rs 18,842/Kg during the day’s trading.