Bullion metals shed more glaze

Gold gives up all its year to date gains

Bullion metal ended lower and gave up almost all of their yearly gains on Monday, 06 April, 2009. Prices fell as traders remained a bit optimist about the overall recovery of the global recession thereby decreasing the appeal of the precious metal. The stronger dollar also added to the selling pressure.

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 Monday, Comex Gold for April delivery fell $24.1 (2.7%) to close at $871.5 an ounce on the New York Mercantile Exchange. During intra day trading, it fell to a low of $865.1. Last week, gold ended lower by 3%. Year to date, gold prices are lower by 1.3%.

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 (15.8%) since then.

On Monday, Comex silver futures for May delivery fell 62.5 cents (4.9%) to end at $12.11 an ounce. Year to date, silver has climbed 7.2% this year. For 2008, silver had lost 24%.

In the currency market on Monday, the dollar pared early losses and gained considerably against its counterparts. The dollar index, which calculates the strength of dollar against a basket of six major currencies rose almost 1%.

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 lower by Rs 355 (2.4%) at Rs 14,121 per 10 grams. Prices rose to a high of Rs 14,425 per 10 grams and fell to a low of Rs 14,022 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed Rs 922 (4.3%) lower at Rs 20,347/Kg. Prices opened at Rs 21,206/kg and fell to a low of Rs 20,100/Kg during the day's trading.