Precious metals end mixed again

Gold drops today but silver rises

After two successive sessions of rise, gold prices ended lower on Wednesday, 21 January, 2009. Prices fell due to the strong 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. But silver prices dropped.

On Wednesday, Comex Gold for February delivery fell $5.1 (0.6%) to close at $850.1 an ounce on the New York Mercantile Exchange. Earlier, prices fell to a low of $843. Last week, gold prices ended down by 1.8%. This year gold has lost 4.1% till date. On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly (20%) since then.

On Wednesday, Comex silver futures for March delivery gained 15 cents (1.3%) to end at $11.325 an ounce. Last week, silver has lost 10.5 cents. For 2008, silver had lost 24%.

At the currency market on Wednesday, the dollar index remained relatively unchanged after gaining almost 2% yesterday.

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%.

At the MCX, gold prices for February delivery closed lower by Rs 33 (0.24%) at Rs 13,460 per 10 grams. Prices rose to a high of Rs 13,648 per 10 grams and fell to a low of Rs 13,337 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 123 (0.7%) higher at Rs 18,567/Kg. Prices opened at Rs 18,441/kg and rose to a high of Rs 18,835/Kg during the day's trading.