Gold and Silver move to record highs

Gold and silver continue to make new marks for themselves

Bullion metals were back in their rally once again today, Thursday, 21 February, 2008 with the slumping dollar and rise in overall commodity prices.

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 $11.4 (1.2%) to close at $949.2 an ounce on the New York Mercantile Exchange. Earlier in the day, prices hit a high of $958.4. On 30 January, 2008 prices had hit a high of $941 in the after hours trading. This year, prices have gained 13.7% till date. In January, prices gained 11%, the highest monthly gain since April 2006. Last week, gold prices suffered a loss of $16.2/ounce (1.8%).

Comex Silver futures for March rose by 19 cents (1.1%) to $17.95 an ounce. Silver has gained 18.3% 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%.

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.

Gold witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.

In the energy market today, crude-oil futures fell by more than $2 today and were back around $97/barrel. Prices dropped as government data showed U.S. crude inventories rose more than expected in the latest week.

In the currency market today, the dollar index, which tracks the performance of the greenback against a basket of currencies, fell 0.7% to 75.56.The greenback was pressured by worse-than-expected manufacturing in the Philadelphia region as reported by the Federal Reserve Bank of Philadelphia.