Bullion metals shine

News of GM's potential bankruptcy make traders return to precious metals

Bullion metal ended higher on Monday, 13 April, 2009. Prices rose fell as traders returned to precious metals on anticipation that GM might hit bankruptcy and the weak earnings season might take stocks deep down the lane further in the coming weeks. This increased the appeal of the precious metals.

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 rose $12.6 (1.4%) to close at $894.7 an ounce on the New York Mercantile Exchange. Last week, gold ended lower by 1.5%. Year to date, gold prices are higher by 0.7%.

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 Monday, Comex silver futures for May delivery rose by 44 cents (3.6%) at $12.77 an ounce. Year to date, silver has climbed 12.8% this year. For 2008, silver had lost 24%.

U.S. stocks today came under pressure amid fears that GM may be forced to file for bankruptcy. Meanwhile, crude oil slumped nearly 6% after the International Energy Agency lowered its forecast for this year's global oil demand.

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 174 (1.2%) at Rs 14,376 per 10 grams. Prices rose to a high of Rs 14,469 per 10 grams and fell to a low of Rs 14,231 per 10 grams during the day's trading.

At the MCX, silver prices for May delivery closed Rs 564 (2.7%) higher at Rs 21,069/Kg. Prices opened at Rs 20,600/kg and rose to a high of Rs 21,200/Kg during the day's trading.