Gold closes above $900

Precious metals rise as oil continues to hover around $128

Gold futures closed above $900 an ounce Monday, 19 May, 2008 marking their first closing above $900 level in almost a week. Prices rose as crude oil prices rose once again and the dollar remained steady against its rivals. Crude oil's rally to a fresh record high near $128 a barrel boosted the precious metal's appeal as an inflation hedge.

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. 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 rose $5.9 (0.65%) to close at $905.8 ounce on the New York Mercantile Exchange. Last week, gold prices ended higher by $14 (1.6%). On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. Prices have dropped by 12% since then.

This year, gold prices have gained 7.9% for the till date against a 8.4% 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 7 cents (0.4%) to $17.03 an ounce. Silver has gained 13.4% 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.

At the currency markets on Monday, the dollar recovered from a two-week low against the euro, extending gains after a rise in U.S. leading economic indicators. The dollar index, which tracks the performance of the greenback against other major currencies, was at 73.092, up from 72.799.

Among major economic news, the Conference Board's index of leading economic indicators rose for a second straight month in April. The index, which attempts to forecast turning points in the economy, rose 0.1% in April, matching March's gain after falling for the five prior months.

In the crude market, crude-oil futures marked their first close above $127 a barrel on Monday, with the market extending last week's strength on growing concerns about energy supply and demand from China. Last week, crude-oil futures rallied to a fresh record high near $128 a barrel as Goldman Sachs raised its second-half-of-the-year forecast for oil prices by 32% to $141.

At the MCX, gold prices for June delivery closed higher by Rs 3 (0.02%) at Rs 12,347 per 10 grams. Prices rose to a high of Rs 12,472 per 10 grams and fell to a low of Rs 12,308 per 10 grams during the day’s trading.

At the MCX, silver prices for July delivery closed Rs 77 (0.32%) lower at Rs 23,474/Kg. Prices opened at Rs 23,580/kg and fell to a low of Rs 23,310/Kg during the day’s trading.