Gold and silver rise

Gold and silver prices rise as crude prices once again soars


Bullion metals rose substantially higher on Monday, 07 April, 2008 after other commodities also rose across the board. Higher inflation concerns from US economy’s overall health increase the precious metals’ demand as a hedge against inflation. Silver prices also rose for the day.

Today precious metals gained despite dollar closing higher for the day against its rivals. 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. On the other hand, a lower dollar pushes up precious metal prices as their demand lessens as it becomes cheaper for traders holding other currencies.

Comex Gold for June delivery today rose $13.6 (1.5%) to close at $926.8 ounce on the New York Mercantile Exchange. Last week, gold prices lost 2.5%. Earlier last week, prices had dropped below $900 for the first time in six weeks. On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce.

This year, gold prices have gained 11% for the till date. For first quarter prices gained 10.7%. In January, prices gained 11%, the highest monthly gain since April 2006. For February, it gained 6%. But in March, prices succumbed and fell by 5.5%.

Comex Silver futures for May delivery rose 36.5 cents (2.1%) to $18.12 an ounce. Silver has gained 20.7% in 2008 till date. Silver gained 16% in Q1. In January this year itself, prices climbed 14%. In February, it gained another 15%. For March, it ended lower by 13%. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years.

In the currency market today, the dollar held overnight gains against most major counterparts as the U.S. stock market extended an overseas rally. The dollar index, which tracks the performance of the greenback against other currencies, gained 0.4% to 72.21.

In the energy market today, crude oil rose $2.86 (2.7%) a barrel in New York to settle at $109.09/barrel.

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. 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 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. The Fed reduced federal funds rate three times in FY 2007. In 2006, silver had jumped 46% while gold gained 23%. Gold has tripled in five years as investment demand has soared and mine supplies have remained low.

At the MCX, gold prices for June delivery closed higher by Rs 105 (0.9%) at Rs 11,951 per 10 grams. Prices rose to a high of Rs 12,015 per 10 grams and fell to a low of Rs 11,790 per 10 grams during the day’s trading.

At the MCX, silver prices for May delivery closed Rs 312 (1.3%) higher at Rs 23,473/Kg. Prices opened at Rs 23,237/kg and rose to a high Rs 23,599/Kg during the day’s trading.