Bullion metals shine

Gold and silver prices rise for the first time in 2009

After three sessions of fall, bullion metal prices ended higher on Tuesday, 06 January, 2009 due to the weaker dollar. 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 Tuesday, Comex Gold for February delivery rose $8.2 (1%) to close at $866.8 an ounce on the New York Mercantile Exchange. It fell to a low of $838.8 during intra day trading. 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.

In 2008, gold prices ended higher by 5.5%. The dollar index has gained 12% that year. In the last quarter, gold prices ended marginally higher by 0.6%. 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%.

On Tuesday, Comex silver futures for March delivery rose 15.5 cents (1.6%) to $11.445 an ounce. Last week, silver has gained 9%. For 2008, silver lost 24%.

At the currency market on Tuesday, the dollar was down against most major counterparts but up against the euro. The dollar index lost 0.4%.

In the crude market on Tuesday, crude futures went lower. Crude for February delivery ended down $0.23 or 0.5%, at $48.58 a barrel on the New York Mercantile Exchange.

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%.

At the MCX, gold prices for February delivery closed higher by Rs 46 (0.34%) at Rs 13,375 per 10 grams. Prices rose to a high of Rs 13,435 per 10 grams and fell to a low of Rs 13,094 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 120 (0.65%) higher at Rs 18,482/Kg. Prices opened at Rs 18,401/kg and went to a high of Rs 18,625/Kg during the day's trading.