Gold rises to highest level in three weeks

Precious metal production data perks up their prices

Gold prices ended considerably higher on Thursday, 19 June, 2008. Prices rose to highest level in almost three weeks after concerns over global economies and a decline in South African gold production lifted prices for the precious metal past $900 an ounce. Silver prices also rose today.

It was reported today that South African gold output in April fell more than 10% in volume terms, compared with a year earlier.

Comex Gold for August delivery rose $10.7 (1.2%) to close at $904.2 ounce on the New York Mercantile Exchange. Earlier during the day, it touched a high of $910.5. Last week, gold prices ended lower by $25.9 (2.9%). 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 8% till date against a 5% 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 Wednesday, Comex silver futures for July delivery rose 13 cents (0.7%) to $17.47 an ounce. For this week, silver has gained 3.2%. Silver has gained 16.7% in 2008 till date. Last week, it finished 87 cents (5%) lower.

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 Thursday, the dollar was mixed after a report showed that U.S. weekly jobless claims fell to a two-week low. The dollar was little changed against a weighted basket of the euro, yen and four other major currencies after declining in the previous three sessions.

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.

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.

In the crude market today, crude-oil futures closed with a loss of almost $5 a barrel after China raised its fuel prices, sparking concerns about a slowdown in demand. Oil prices climbed earlier on news that a Royal Dutch Shell oil platform off the coast of Nigeria was shut down after an attack by local militants but then slipped again and ended considerably lower for the day.

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 higher by Rs 121 (0.97%) at Rs 12,510 per 10 grams. Prices rose to a high of Rs 12,610 per 10 grams and fell to a low of Rs 12,332 per 10 grams during the day’s trading.

At the MCX, silver prices for July delivery closed Rs 109 (0.44%) higher at Rs 24,504/Kg. Prices opened at Rs 24,385/kg and rose to a high of Rs 24,909/Kg during the day’s trading.