Precious metals end higher

Gold and silver prices end modestly higher as dollar goes lower

Precious metals ended modestly higher on Wednesday, 18 June, 2008. The weakness in dollar and the rising crude price were the main reasons behind this. Prices also rose on speculation that a slowing U.S. economy will deter the Federal Reserve from raising borrowing costs.

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 rose $6.6 (0.8%) to close at $893.5 ounce on the New York Mercantile Exchange. 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 6.8% till date against a 4.8% 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 27 cents (1.6%) to $17.34 an ounce. For this week, silver has gained 2.5%. Silver has gained 16% 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 Wednesday, the dollar headed lower, with traders reconsidering bets that the Federal Reserve will be raising interest rates later this year as economic woes hit stocks on Wall Street. The dollar index which tracks the performance of the greenback against other major currencies, fell 0.1% to 73.44.

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, crude oil futures rose for the first time in four days after a statement that President George W. Bush is not expecting announcements of increased oil production at the 22 June conference in Saudi Arabia. Crude oil for July delivery rose $2.67 (2%) to settle at $136.68 a barrel.

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 110 (0.89%) at Rs 12,389 per 10 grams. Prices rose to a high of Rs 12,412 per 10 grams and fell to a low of Rs 12,250 per 10 grams during the day’s trading.

At the MCX, silver prices for July delivery closed Rs 348 (1.44%) higher at Rs 24,395/Kg. Prices opened at Rs 24,080/kg and rose to a high of Rs 24,582/Kg during the day’s trading.