Bullion metals end higher

Gold and silver both gain as Aloca reports more than expected loss

Bullion metal ended higher once again on Wednesday, 08 April, 2009. Prices rose as traders still continued to worry about the current recessionary conditions as Alcoa posted a larger than expected loss in its latest quarter. These sentiments once again fuelled the recession concerns thereby increasing the appeal of the precious metal.

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 Wednesday, Comex Gold for April delivery rose $2.6 (0.3%) to close at $884.8 an ounce on the New York Mercantile Exchange. Last week, gold ended lower by 3%. Year to date, gold prices are lower by 0.4%.

For the month of March, gold fell 2.1%, down for the first month in five. But the metal gained 4.3% in the first quarter. Before March, for the month of February, gold ended higher by 7.4%. For January, 2009, gold had gained 3.9%.

On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped somewhat (15.5%) since then.

On Wednesday, Comex silver futures for May delivery rose 13 cents (1.1%) to end at $12.34 an ounce. Year to date, silver has climbed 9.2% this year. For 2008, silver had lost 24%.

After market closed yesterday, Alcoa reported its latest quarterly earnings. The company reported a first quarter (March) loss of $0.59 per share. Revenues fell 40.7% year-over-year to $4.15 billion versus the $4.08 billion consensus. The sharp drop in revenue resulted from the impact of the economic downturn on Alcoa's end markets - automotive, transportation, building and construction and aerospace.

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 June delivery closed higher by Rs 1 (0.001%) at Rs 14,298 per 10 grams. Prices rose to a high of Rs 14,465 per 10 grams and fell to a low of Rs 14,211 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed Rs 51 (0.24%) higher at Rs 20,553/Kg. Prices opened at Rs 20,645/kg and rose to a high of Rs 20,750/Kg during the day's trading.