Bullions glitter on crude rise

All time high crude price pulls up precious metals

A new all time high crude price pulled up bullion metals today, Monday, 05 May, 2008. With today, bullion metals went up for two straight days. On the other hand, dollar also weakened despite a strong non-manufacturing Institute if Supply Management’s report. Silver prices also rose for the day.

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 $16.1 (1.9%) to close at $874.1 ounce on the New York Mercantile Exchange. During intra day trading, prices touched a high of $874.8. Last week, gold prices lost $32 (3.6%) against previous week’s close. On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce.

This year, gold prices have gained 4.5% for the till date against a 9% 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 36 cents (2%) to $16.83 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 today, the U.S. dollar weakened even after a report from the Institute for Supply Management showed that nonmanufacturing sectors of the U.S. economy expanded during April after three months of contraction. The dollar index, which tracks the performance of the greenback against a basket of currencies, was down 0.4% to 73.19.

The ISM nonmanufacturing index rose to 52.0% from 49.6% in March. The increase was unexpected.

In the energy market today, crude prices ended near about $120/barrel due to supply disruptions at Nigeria.

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.

At the MCX, gold prices for June delivery closed higher by Rs 157 (1.4%) at Rs 11,464 per 10 grams. Prices rose to a high of Rs 11,473 per 10 grams and fell to a low of Rs 11,320 per 10 grams during the day’s trading.

At the MCX, silver prices for May delivery closed Rs 303 (1.4%) higher at Rs 22,2029/Kg. Prices opened at Rs 22,210/kg and went to a high of Rs 22,501/Kg during the day’s trading.