Gold and silver prices rise as crude prices rally
Bullion metals rose for the third consecutive day on Friday, 8 February, 2008. Prices rose as crude oil rallied and closed almost 4% higher for the day. Also, news of potential supply shortages in South Africa continued to hit the market. Silver prices also ended considerably higher for the day.
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 April delivery rose $12.3 (1.3%) to close at $922.3 an ounce on the New York Mercantile Exchange. On 30 January, 2008 prices had hit a high of $941 in the after hours trading. This year, prices have gained 10.8% till date. In January, prices gained 11%, the highest monthly gain since April 2006. For the week, gold prices closed higher by $8.8 (0.96%) against previous close of $913.5.
Comex Silver futures for March today rose by 33.5 cents (2%) to $17.110 an ounce. Silver has gained 14% in 2008. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years. In January this year itself, prices climbed 14%.
As per reports, severe power shortages in South Africa, the world's second-largest gold producer continued to post serious threats to mine production.
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 markets on Friday, the dollar stuck mostly to recent trading ranges as currency traders awaited a meeting of Group of Seven finance ministers and central bankers. The dollar index, which tracks the performance of the greenback against a basket of six major currencies, declined 0.3% to 76.655.
In the energy market on Friday, crude prices surged more than 4% as OPEC minister hinted at a production cut to restore back crude prices at higher level.