Bullion metals end mixed

Sharp rebound in US stocks reduce appeal of yellow metal as safe investment haven

A strong rebound in US stocks and also stocks worldwide in the last twenty four hours pushed precious metals lower for third straight day on Monday, 13 October, 2008. Investors generally tend to seek safety in gold when the economy falls into turmoil and vice versa. But silver prices rose on that day

On Monday, Comex Gold for December delivery fell $16.5 (1.9%) to close at $842.5 an ounce on the New York Mercantile Exchange. On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly since then. Last week, gold prices ended higher by 3.1%.

For the third quarter ended September, 2008, gold prices ended lower by 5.1%. It was the first quarterly loss for the yellow metal since the second quarter in FY 2007. Prior to that, the yellow metal ended second quarter with a marginal gain of 0.7%. For first quarter prices gained 10.7%. This year, gold prices have gained 0.9% till date.

On Monday, Comex silver futures for December delivery gained 1.8% to $10.79 an ounce. Silver had ended month and quarter of September 2008 with a loss of 10%. It ended August with a loss of 2.4% and July 2008 with a gain of 3%. For the second quarter, it had gained a paltry 1.4%. Silver had gained 16% in Q1. Till date, silver has lost 29% this year. The metal also had gained for seven straight years.

In the US stock market on Monday, 13 October, the stock market, the indices finished sharply higher snapping an eight session losing streak in the process. The rebound was fueled by several governments taking steps to shore up the financial system and Morgan Stanley completing its deal to receive a capital infusion from a Japanese bank.

The U.S. is expected to outline a comprehensive plan of its own as soon as Tuesday, 14 October, 2008 and is likely to include interbank lending and bank debt guarantees, and direct capital injections in financial institutions.

Earlier this year, the weakening dollar and higher global demand for raw materials had led to records this year for commodities including gold. Gold reached a record in March as a U.S. housing slump and credit crisis spurred the Federal Reserve to slash borrowing costs. The Federal Reserve halted cuts to its target bank lending rate in April, after slicing it in seven steps to 2% from 5.25% in September.

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. Silver had climbed 16% in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.

At the MCX, gold prices for December delivery closed lower by Rs 379 (2.8%) at Rs 13,068 per 10 grams. Prices rose to a high of Rs 13,600 per 10 grams and fell to a low of Rs 12,865 per 10 grams during the day’s trading.

At the MCX, silver prices for December delivery closed Rs 318 (1.7%) higher at Rs 18,764/Kg. Prices opened at Rs 18,446/kg and rose to a high of Rs 18,832/Kg during the day’s trading.