Bullion metals shine

Gold crosses $1,000 mark once again

Bullion metal prices ended higher on Friday, 20 February, 2009. With this rise, gold was back above $1,000 level roughly after a year. Deep recession fears have been increasing the appeal of the precious metals as a safe haven against alternatives since past few days.

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 Friday, Comex Gold for April delivery rose $25.7 (2.6%) to close at $1,002.2 an ounce on the New York Mercantile Exchange. During the day, it rose to a high of $1,007.7. For the week, gold ended roughly higher by 5.5%. For January, 2009, gold had gained 3.9%. Year to date, gold prices are higher by 13.6%.

On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly (11%) since then.

On Friday, Comex silver futures for March delivery rose 55 cents (4%) to end at $14.49 an ounce. Year to date, silver has climbed 28.5% this year. For 2008, silver had lost 24%.

The World Gold Council reported this week that demand for gold surpassed $100 billion last year for the first time ever, amid increased industrial and jewelry consumption and investors' purchase of the metal as a safe haven. Gold demand - including jewelry consumption, industrial demand and identifiable investments such as bars, coins and gold exchange-traded funds - hit $102 billion in 2008, up 29% from a year ago. In tonnage terms, gold demand rose 4% to 3,659 tons.

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%.