Bullion metals end mixed

Economic data weighs on dollar pulling gold higher

Bullion metals ended higher on Thursday, 08 January, 2009 as the dollar weakened today due to the weak economic data. 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 and also vice versa.

On Thursday, Comex Gold for February delivery rose $12.8 (1.5%) to close at $854.5 an ounce on the New York Mercantile Exchange. This year gold has lost 3.3% till date. Last week, gold prices gained 1%. On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly (15%) since then.

On Thursday, Comex silver futures for March delivery fell marginally to $11.097 an ounce. Last week, silver has gained 9%. For 2008, silver lost 24%.

At the currency market on Thursday, the dollar was down against most major counterparts. The dollar index lost 0.8%.

Among the major economic reports for the day, the Labor Department reported that initial jobless claims fell 24,000 to a seasonally adjusted 467,000 in the week ended 3 January, 2009. Despite the decline in the most recent weekly data, the level of initial claims is 42% higher than the year-earlier period and was at highest level in twenty six years. The four-week average of new claims fell 27,000 to 525,750, and is up 53% from the prior year.

In the crude market on Thursday, crude prices fell by almost a dollar and closed at $41.7/barrel.

In 2008, gold prices ended higher by 5.5%. The dollar index had gained 12% that year.

Last year, the weakening dollar and higher global demand for raw materials had led to records for commodities including gold. Gold reached a record in March 2008 as a U.S. housing slump and credit crisis spurred the Federal Reserve to slash borrowing costs. In the last move, the Federal Reserve has cuts its target bank lending rate to 0.25% from 5.25% in September, 2007. The Fed did it in nine steps.

Prior to 2008, 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%.