Bullion metals add more luster

Gold all set to touch its all time high set at March 2008

Bullion metal prices rose to their highest levels in seven months on Tuesday, 17 February, 2009. Prices rose despite the strong dollar and also as deep recession fears increased the appeal of the precious metals as a safe haven against alternatives.

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 $25.5 (2.7%) to close at $967 an ounce on the New York Mercantile Exchange. During the day, it rose to a high of $973.8. Last week, gold prices ended up by 3%. For January, 2009, gold had gained 3.9%. Year to date, gold prices are higher by 9.1%.

On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly (13%) since then.

On Tuesday, Comex silver futures for March delivery rose 38.5 cents (2.8%) to end at $14.01 an ounce. Year to date, silver has climbed 22.7% this year. For 2008, silver had lost 24%.

In the currency market on Friday, the dollar index ended higher by 0.6%.

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 April delivery closed higher by Rs 784 (5.3%) at Rs 15,491 per 10 grams. Prices rose to a high of Rs 15,563 per 10 grams and fell to a low of Rs 14,738 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 1356 (6.3%) higher at Rs 22,784/Kg. Prices opened at Rs 21,496/kg and rose to a high of Rs 22,992/Kg during the day's trading.