Gold moves up again

Gold rises for third straight day while silver drops marginally

Gold prices went up substantially for the third straight day on Thursday, 12 February, 2009. Anticipation that the bailout plan for banks and stimulus package for overall economy will increase inflation continued to increase the appeal of the precious metals as alternate investment. Prices rose to almost seven month high. Silver prices ended little lower today.

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 Thursday, Comex Gold for February delivery rose $4.7 (0.5%) to close at $948.5 an ounce on the New York Mercantile Exchange. It rose to a high of $952.8 earlier during the day. The more active April contract rose to a high of $949.2 today. Last week, gold prices ended down by 1.5%. For January, 2009, gold had gained 3.9%. Year to date, gold prices are higher by 7.1%.

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

On Thursday, Comex silver futures for March delivery fell marginally to end at $13.51 an ounce. Year to date, silver has climbed 19% this year. For 2008, silver had lost 24%.

There was a mixed batch of economic reports on Wall Street on Thursday. While, the number of first time jobless claims registered a drop last week after a long time, on the other hand, retailers registered an increase in sales after quite a long time on a yearly basis.

In Washington, final touches continued to be given to the $789 billion stimulus plan which is supposed to go for vote in the weekend.

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 95 (0.64%) at Rs 14,785 per 10 grams. Prices rose to a high of Rs 14,824 per 10 grams and fell to a low of Rs 14,580 per 10 grams during the day's trading.

At the MCX, silver prices for March delivery closed Rs 128 (0.6%) higher at Rs 21,314/Kg. Prices opened at Rs 21,176/kg and rose to a high of Rs 21,575/Kg during the day's trading.