Bullion end mixed

Precious metals register strong gains for the week

Bullion metals ended with losses today, Monday, 23 June, 2008 as the dollar rallied. Silver prices also fell today.

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 August delivery fell $16.5 (1.5%) to close at $887.2 ounce on the New York Mercantile Exchange. It fell to a low of $879 during intra day trading. With this, gold gave up some of its last week’s gains. Last week, gold prices ended higher by $30.6 (3.5%). Last month, in May, it ended with a gain of higher by $22.5 (2.5%). On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped since then.

This year, gold prices have gained 6.5% till date against a 6% drop for the dollar against the euro. Before May, 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%.

On Monday, Comex silver futures for July delivery fell 60.7 cents (3.5%) to $16.79 an ounce. Last week, silver has gained 5%. Silver has gained 13.5% in 2008 till date.

Silver prices ended the month of May 2008 with a gain of 2.7%. For April, it closed lower by 5.5%. Silver had 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 index which measures the greenback against a basket of trading partners, was at 73.47, compared with 73.05 late Friday. The euro lost ground after closely tracked gauges of German economic sentiment and euro-zone activity weakened more than expected in June.

Since last September, Fed has axed interest rates seven times and brought it down to 2%. On the other hand, the ECB has kept rates unchanged at 4% since June, 2007.

In the crude market on Monday, crude-oil futures closed with a gain of more than $1 per barrel, with energy traders showing disappointment over Saudi Arabia's latest move to increase production as concerns over output in Nigeria continued to grow. Crude for August delivery closed at $136.74 a barrel on the New York Mercantile Exchange, up $1.38, or 1%. It traded as high as $137.85 during the Nymex session.

Gold had 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. In 2006, silver had jumped 46% while gold gained 23%.

At the MCX, gold prices for August delivery closed lower by Rs 217 (1.7%) at Rs 12,309 per 10 grams. Prices rose to a high of Rs 12,623 per 10 grams and fell to a low of Rs 12,215 per 10 grams during the day’s trading.

At the MCX, silver prices for July delivery closed Rs 749 (3.1%) lower at Rs 23,744/Kg. Prices opened at Rs 24,530/kg and fell to a low of Rs 23,513/Kg during the day’s trading.