Bullion metals continue to glitter

Precious metals gain most in a week

After dropping in the previous two sessions, bullion metal prices went up for second straight day on Thursday, 05 February, 2009. Weak economic data increased the appeal of the precious metal 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. But silver prices dropped.

On Thursday, Comex Gold for April delivery rose $12 (1.3%) to close at $913.6 an ounce on the New York Mercantile Exchange. Price had gone up by 1.1% yesterday. Last week, gold prices ended higher by 3.5%. For January, 2009, gold had gained 3.9%. Year to date, gold prices are higher by 3.4%.

On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly (12%) since then.

On Thursday, Comex silver futures for March delivery rose 28 cents (2.2%) to end at $12.75 an ounce. Year to date, silver has climbed 13% this year. For 2008, silver had lost 24%.

Among major economic reports of the day, there were quite a few. The Commerce Department reported today that new orders for manufactured goods in US fell 3.9% in December for the fifth consecutive month of declines. It was a little more thane expected. In November, orders fell 6.5%, revised lower from a previously estimated drop of 4.6%.

The Labor Department reported today that the number of new claims for state unemployment benefits surged to their highest level since 1982. Initial jobless claims rose 35,000 to a seasonally adjusted 626,000 in the week ended 31 January, 2009. This put the number at the highest level in 26 years. Meanwhile, the four-week average of new claims rose by 39,000 to 582,250. Continuing jobless claims rose by 20,000 in the week ended 24 January, 2009 to a seasonally adjusted 4.79 million, the most since the government's records began in 1967.

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 148 (1.05%) at Rs 14,202 per 10 grams. Prices rose to a high of Rs 14,388 per 10 grams and fell to a low of Rs 14,082 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 378 (1.9%) higher at Rs 20,118/Kg. Prices opened at Rs 19,739/kg and went to a high of Rs 20,290/Kg during the day's trading.