Bullion metals shed some shine

Stronger than expected jobless claim report decrease the appeal of precious metals

Bullion metal ended lower on Thursday, 16 April, 2009. Prices fell as better than expected jobs data reduced the appeal of precious metals as an alternate source of investment.

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 June delivery fell $13.7 (1.5%) to close at $879.8 an ounce on the New York Mercantile Exchange. Last week, gold ended lower by 1.5%. Year to date, gold prices are lower by 0.6%.

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 Thursday, Comex silver futures for May delivery fell 54.5 cents (4.3%) at $12.255 an ounce. Year to date, silver has climbed 7.7% this year. For 2008, silver had lost 24%.

The Labor Department reported today that initial claims for the week ending 11 April totaled 610,000, which is down more than expected from the prior week, but continuing claims climbed more than expected to a new record of 6.02 million. The latest jobless claims data suggested that the pace of layoffs is slowing, but that it isn't getting any easier to find work.

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 142 (0.99%) at Rs 14,140 per 10 grams. Prices rose to a high of Rs 14,328 per 10 grams and fell to a low of Rs 14,102 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed Rs 721 (3.4%) lower at Rs 20,372/Kg. Prices opened at Rs 20,951/kg and fell to a low of Rs 20,265/Kg during the day's trading.