Bullion metals turn pale

Lower crude and US stocks drag precious metals lower

Bullion metals ended lower on Wednesday, 07 January, 2009 in spite of 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. Falling crude prices and losses at US Market dragged bullion metals lower.

On Wednesday, Comex Gold for February delivery fell $24.3 (2.8%) to close at $841.7 an ounce on the New York Mercantile Exchange. This year gold has lost 4.8% 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.

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 Wednesday, Comex silver futures for March delivery fell 41 cents (3%) to $11.105 an ounce. Last week, silver has gained 9%. For 2008, silver lost 24%.

At the currency market on Wednesday, the dollar was down against most major counterparts. The dollar index lost 0.6%.

In the crude market on Wednesday, crude prices fell by almost 12% and closed a little above $42/barrel. The EIA reported today that U.S. crude stockpiles gained 6.7 million barrels to 325.4 million in the week ended 02 January, 2009. Market had expected a buildup of 1.5 million barrels.