Bullion metals register modest gains

Gold prices end week more than 3% higher

Precious metals ended higher on Friday, 09 May, 2008. The weak dollar was the main reason for this. Higher crude prices also added to the reason behind the rise. Prices rose as crude touched a fresh new high at $126/barrel. Silver prices also rose for the day. Dollar weakness typically benefits dollar-denominated commodities, such as gold and crude oil, because it makes them cheaper for holders of other currencies.

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.

Comex Gold for June delivery rose $3.7 (0.4%) to close at $885.8 ounce on the New York Mercantile Exchange. The day before, prices had dropped by more than $6. For the week, gold prices ended higher by $3.2 ($27.8). On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce.

This year, gold prices have gained 6% for the till date against a 9.2% drop for the dollar against the euro. For April, prices closed lower by 6.3%. 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 July delivery rose 4 cents (0.02%) to $16.91 an ounce. Silver has gained 13% in 2008 till date. For April, it closed lower by 5.5%. 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.

On the currency markets on Friday, the greenback fell against other major currencies, with the dollar index was at 73.05, down from 73.478. Dollar weakness typically benefits dollar-denominated commodities, such as oil and gold, because it makes them cheaper for holders of other currencies.

Crude-oil futures touched a fresh record once again near $126 on Friday. Crude-oil futures for light sweet crude for June delivery closed at $125.96/barrel (higher by $2.27/barrel or 1.8%) on the New York Mercantile Exchange. Price touched a high of $126.25 earlier during the day. In the past six sessions, crude prices have gone up by almost $13.5 (11.7%).

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.